Bye Bye 12b1 fees ED Jones

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Jun 20, 2007 11:55 am

What in the world will you guys do when the SEC gets rid of your


12-b-1 fees?  Starting every year from square one has got to hurt.


Jun 20, 2007 11:59 am

You think that will really happen?

Jun 20, 2007 12:46 pm

Jones isn't the only firm that would feel it IF 12-b-1 fees go away.  The name of the fee might change, but I don't believe that they will go away completely.  It is an interesting discussion the SEC is having though.


Jun 20, 2007 12:54 pm

Can't see how the SEC would screw the smaller investor by doing away with them. How many of us really use our big clients to " subsidize our small clients " , and do some social work. 12b1s just help pay for servicing small clients. This elitist liberal Spitzer stuff will swing the other way. Spurred by Hillary jacking taxes, folks will demand a lighter federal hand and choice.

Jun 20, 2007 1:45 pm

we all will be hurt by this. that is why i am a big first trust,Van kampen and claymore uit producer. just trying to stay ahead of the ball of s**t

Jun 20, 2007 2:16 pm
vbrainy:

What in the world will you guys do when the SEC gets rid of your


12-b-1 fees?  Starting every year from square one has got to hurt.




Adjust to the new reality and take care of business.  If it happens.  Isn't it really the B and C share fees they are most concerned about?

Jun 20, 2007 2:40 pm
Maxstud:
vbrainy:

What in the world will you guys do when the SEC gets rid of your


12-b-1 fees?  Starting every year from square one has got to hurt.





Adjust to the new reality and take care of business.  If it happens.  Isn't it really the B and C share fees they are most concerned about?



Interesting point on the B shares.  That should hurt the MF since they already paid the advisor.  Correct?

Jun 20, 2007 4:07 pm

The big concern is disclosure, not the charging of fees, per se.  The fees will not go away.  Commissions on MFD's have gone down so much over the years, before long there will BE NO commissions.  That just isn't going to happen.  You can't up-end an entire industry.  That will screw the little investors (who wants to pay wrap fees for their little $20K rollover??).  They will allow them, but will likely need to be disclosed on customer statements as a fee of some sort (outside of the performance of the fund).

Jun 20, 2007 4:27 pm
Broker24:

The big concern is disclosure, not the charging of
fees, per se.  The fees will not go away.  Commissions on
MFD's have gone down so much over the years, before long there will BE
NO commissions.  That just isn't going to happen.  You can't
up-end an entire industry.  That will screw the little investors
(who wants to pay wrap fees for their little $20K rollover??). 
They will allow them, but will likely need to be disclosed on customer
statements as a fee of some sort (outside of the performance of the
fund).





Yes you can upend an entire industry. Most likely we will see a cap on 12b-1 fee's to 25bp, what would be very cool is a ban on revenue sharing.



Of course that would kill the payout to EDJ GP's by 70%.

Jun 20, 2007 4:54 pm

Banning sub/TA fees


Can you imagine what that would do not only to discount brokers


But it would also have a huge effect on the wires house payouts.


Also LPL and other indies bottom line!


Interesting thought! 

Jun 20, 2007 4:57 pm

The fund families would just figure out another way to make themselves financially important to the firms they want to work with.  Not just with Jones, but with everyone else that does revenue sharing. 


We'd also quickly launch the fee based accounts they've been talking about.  The GP payout might miss a beat, but it wouldn't be a long beat.  And I wouldn't be starting at $0 every month anymore.  

Jun 20, 2007 5:02 pm

12b1's aren't going anywhere.

Jun 20, 2007 5:59 pm

What's all this nonsense about the little guy getting hurt if 12B-1 fees go

away? Like you give a shisa about the little guy. Trails are gravy, and you

don't want your gravy to go away.



I really hope you don't actually believe the PR put out by the mutual fund

industry.

Jun 21, 2007 10:25 am
aldo63:

we all will be hurt by this. that is why i am a big first trust,Van kampen and claymore uit producer. just trying to stay ahead of the ball of s**t


LOVE UITs myself

Jun 21, 2007 12:17 pm
Edward Pwns:

What's all this nonsense about the little guy getting hurt if 12B-1 fees go
away? Like you give a shisa about the little guy. Trails are gravy, and you
don't want your gravy to go away.

I really hope you don't actually believe the PR put out by the mutual fund
industry.


What are you talking about? C shares can be cheaper than A shares at 1% wrap. Maybe you don't give a shisa about the little guy - my point was, some little guys come to me and I help them because I am a nice person and do care.


If you think the way this industry offers to charge clients is just PR, I question whether you really have a diversified book and can relate to reality.

Jun 21, 2007 1:16 pm
GolFA:
Edward Pwns:

What's all this nonsense about the little guy getting hurt if 12B-1 fees go
away? Like you give a shisa about the little guy. Trails are gravy, and you
don't want your gravy to go away.

I really hope you don't actually believe the PR put out by the mutual fund
industry.


What are you talking about? C shares can be cheaper than A shares at 1% wrap. Maybe you don't give a shisa about the little guy - my point was, some little guys come to me and I help them because I am a nice person and do care.


If you think the way this industry offers to charge clients is just PR, I question whether you really have a diversified book and can relate to reality.



How long have you been in the business.  How nice that you care for the little guy.  Most little guys (under$50,000) are better served by staying in their 401k program or trading on line.


You need $30,000,000 to survive in this business.  That is 300 clients.  You can't really take good care or many more people than that.  Oh, unless you just charge the upfront comission and run.


Financial Advisors cannot help everyone who they come by, and they should not.  Spend time on people who value your business and will pay for your time and expertise.

Jun 21, 2007 1:32 pm

Well I run more than 30m but I have less than 300 clients. Biggest is 5m + and smallest is a few K. I don't think there are many meaningful hard and fast rules, you get to build it as you see fit. Of course I care about the little guy, I work by referral only. Sweet spot is around 300k. It seems to work okay for me, I am the product, not my affiliates or particular ideas or investment vehicles. I am sure you can relate, anyway.

Jun 21, 2007 2:02 pm
GolFA:

Well I run more than 30m but I have less than 300 clients. Biggest is 5m + and smallest is a few K. I don't think there are many meaningful hard and fast rules, you get to build it as you see fit. Of course I care about the little guy, I work by referral only. Sweet spot is around 300k. It seems to work okay for me, I am the product, not my affiliates or particular ideas or investment vehicles. I am sure you can relate, anyway.


I guess one of the few downsides of working in a bank program is average account size.   Out of my 450 households only around 10 have more than 300k with me.    My average account is about 50k.     I would imagine over time this average account size will rise.   Since I only cover one branch I really need to focus more on bringing in assets outside of the bank since I've "cherry picked"  most of the low hanging fruit here already.     I have around 25M  under management and hopefully will reach 30M around the end of the year.   Hopefully then I will feel like I can "survive".


Scrim

Jun 21, 2007 2:28 pm

Interesting, Scrim. Vbrainy brings up a good point about economy of scale, and I would think an "average" of 250k would be " necessary". But I was just looking at my net net payout, it is about 38% of AUM after everything ( solo independent office, help, ticket charges, E & O, entertainmnet, my car, phones - everything). And, I keep a lot of money in low key stuff like CDs, and the wrap accounts are at 1% under 1m and lower over 1m.


Wow, didn't know my payout was only 38%. But I don't have to wear a suit, and work about thirty hours a week, close to home - still - maybe your bank situation is not that bad, even with smaller accounts, if they would pay for some staff to provide some service, maybe you could get more referrals from your bigger accounts if you could spend time golfing with them.


Believe it or not, Bond Guy's marketing appeals to me - I'm wondering if anyone ever goes from independent back to wire house, just for the support, I guess the payout would be at least 38% net net? What is the bank payout net net? ( Don't think I could do a bank at this point!) But for raw cold calling power, check out that Bond GUy stuff on the cold calling section.

Jun 21, 2007 2:32 pm

I don't think you're too bright.