EDJ Unveils Fee Based Platform

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Jun 20, 2008 11:16 pm

It's Summer Regional Time! Jonesers, what's the scoop on this topic- been promised for years- was it worth the wait?

Jun 20, 2008 11:17 pm

Wow this is Cutting edge stuff they are doing lol

Jun 21, 2008 10:34 am

Reminds me of the Paul Simon song....


Still waiting after all these years. Oh still waitng after all these years.
 
But I am sure Spiff will be telling us how truly different their platform is.......................on Monday when he gets in the office.
 
Rumor has it that the compliance officer at the regional will be pulling him aside to discuss the magnitude of his defense addiction, and suggest that perhaps he take some time off to decompress.
 
Meanwhile he was just voted most inspirational at the meeting by his peers and asked by the regional leader to volunteer (some would call it a donation to the firm) 1 hour a week (just for the next 6 months or so) to mentor another new rep who is moving in two blocks from him. The reason for the request.... because others before him gave back to the firm and so should he. Besides LP is calculated with a subjective formula after profitability (still paying 1300/mo for that T1?) that supposedly is enhanced by volunteering.
 
Spiffy....we are more alike than you can imagine....
 
Jun 22, 2008 12:54 am

It will be interesting how this is presented to my local market since two different Jones reps have taken an account from me by telling my clients how awful fees are.  I don't know how many times they've badmouthed my fee accounts...all I know is that it's worked twice...both times with clients I'd had less than a year.  Once clients have some history with a fee-based arrangement, they're generally not fooled by the evil fee-based broker story.  I don't see this fee-based platform at Jones being difficult to compete against as it sounds pretty limited from what I've heard thus far.

Jun 22, 2008 2:17 am
Indyone:

It will be interesting how this is presented to my local market since two different Jones reps have taken an account from me by telling my clients how awful fees are.  I don't know how many times they've badmouthed my fee accounts...all I know is that it's worked twice...both times with clients I'd had less than a year.  Once clients have some history with a fee-based arrangement, they're generally not fooled by the evil fee-based broker story.  I don't see this fee-based platform at Jones being difficult to compete against as it sounds pretty limited from what I've heard thus far.

 
Indy- How much in fees were you charging?  How big were the accounts?  Did you find out what the EDJ reps put them into?
 
I'm assuming they were wrapped mutual funds. 
Jun 22, 2008 9:32 am

I am piloting the program.

It is made up of approx 200 funds/etf/index funds.   Their are 24 research models that fit into the edj pyramid.  Which are Core, Core plus( includes niche funds like commodities, real estate), and index/etf portfolio, and a tax efficient model.
However, you can also customize it using any mix of the available funds to your liking.  It does have to fit in the parameters of the pyramid.  You can't have all Growth and no Growth and Income for example.

The fee is 1.35, and is discountable up to 30%.  Payout is 40% up to a 15% discount. Any bigger discount, payout is cut to 30%.  Also when you build your portfolio you can also see the average expenses for the individual mutual funds that you are adding.  which range from 10 basis points to just over 100bps.  Some of the mutual funds are Class A, some are Class F.  Revenue sharing and any 12b1's not deducted from the expense ratio are rebated back to the client.

The minimum account is 100k and you can have any account you want.  You can also change an A share client into the program.  If the client had paid the up front sales commision in the previous 2 years, the prorated fee will be deducted from the monthly fees over a two year period.  This also applies to CDSC if you are changing into the program.  

Currently you cannot do bonds/stocks....yet so I hear.  But not a bad program to start.  Obviously not as flexible as Indy's but acceptable for 95% of FA's

Jun 22, 2008 8:20 pm

If you charge 1%, which seems like a fair price for the investment options available,the payout will very little more than the fund service fee. That doesn't seem like much of a deal for the FA when you consider it is also reduced by national charge etc. I must be missing something.

Jun 22, 2008 8:57 pm

The 1.35% charge is your gross commision.  This is vs the 25 bps on service fees that you get gross.  So its a 5x increase in commision gross and net.


Jun 22, 2008 9:04 pm

You are correct, I was not thinking straight.

Jun 23, 2008 12:28 am
snaggletooth:
Indyone:

It will be interesting how this is presented to my local market since two different Jones reps have taken an account from me by telling my clients how awful fees are.  I don't know how many times they've badmouthed my fee accounts...all I know is that it's worked twice...both times with clients I'd had less than a year.  Once clients have some history with a fee-based arrangement, they're generally not fooled by the evil fee-based broker story.  I don't see this fee-based platform at Jones being difficult to compete against as it sounds pretty limited from what I've heard thus far.

 
Indy- How much in fees were you charging?  How big were the accounts?  Did you find out what the EDJ reps put them into?
 
I'm assuming they were wrapped mutual funds.
 
1% - 200K & 80K - about half were transfered in kind and the remainder were liquidated because the rep said they could not be held at Jones.  I assume the free funds were reinvested in load funds, but that's just a guess. - they were wrap accounts...mostly mutual funds and ETFs.
Jun 23, 2008 3:14 pm

Remember, it is 37-40% of 1.35% at EJ.

Versus 85-90% of the same and pay my own way, picking the services from headquarters I want.
Hmmmmmm.....
Jun 23, 2008 4:47 pm
footsoldier:

Reminds me of the Paul Simon song....


Still waiting after all these years. Oh still waitng after all these years.
 
But I am sure Spiff will be telling us how truly different their platform is.......................on Monday when he gets in the office.
 
Rumor has it that the compliance officer at the regional will be pulling him aside to discuss the magnitude of his defense addiction, and suggest that perhaps he take some time off to decompress.
 
Meanwhile he was just voted most inspirational at the meeting by his peers and asked by the regional leader to volunteer (some would call it a donation to the firm) 1 hour a week (just for the next 6 months or so) to mentor another new rep who is moving in two blocks from him. The reason for the request.... because others before him gave back to the firm and so should he. Besides LP is calculated with a subjective formula after profitability (still paying 1300/mo for that T1?) that supposedly is enhanced by volunteering.
 
Spiffy....we are more alike than you can imagine....
 
Funny. 
 
The platform is nice.  At least for me.  It's not much different from an investment standpoint than what I see with 95% of the wonderful FAs at places like ML or MS doing these days.  Most people are using a mixture of funds and ETFs.   They might have the ability to throw individual stocks in there, but most of them aren't. 
 
I don't know enough about the other platforms nuts and boltsout there to know exactly how different ours is.  I know our fee is competitive.  I know the funds chosen are good.
 
There are three levels of scrutiny placed on the program.  IPAC (Investment Policy Advisory Committee) sets the general guidelines for asset allocation.  A group of CFAs do the due diligence on the funds and ETFs to make sure to get what they perceive as the best of class to put into the program.  Then there is an Advisory Solutions Committee that oversees the whole thing to make sure the other two are doing their job. 
 
There is a threshold rebalancing program instead of a timed program like I see most of the time.  Meaning, when the Income portion gets over or underweighted as compared to the target by some percentage, they will rebalance.   Most of the time I see rebalancing quarterly if they are rebalancing at all.  And it's not based on anything other than a calendar.  
 
12b-1 fees, shareholder accounting fees, and revenue sharing are all rebated to the client.  However, those rebates don't take any money out of my pocket.  That may be SOP with accounts like this, I just don't know. 
 
There is also a Jones requirement to have a minimum annual meeting with these clients.  They will sign off to say it actually happened.   
 
 
On the volunteering - I enjoy helping the new FAs, the region, and the firm.  I see it as helping my LP return currently, but also helping me get more in the future.  I figure every dollar I put into my LP is a another chunk of income I don't have to worry about in retirement.    
Jun 23, 2008 4:49 pm
Effay:

Remember, it is 37-40% of 1.35% at EJ.

Versus 85-90% of the same and pay my own way, picking the services from headquarters I want.
Hmmmmmm.....
 
You do know you're comparing apples to oranges, right? 
Jun 23, 2008 6:02 pm

Sounds like a pretty good program-- i am impressed that so much has changed for the better so quickly at Jones.

Jun 23, 2008 6:45 pm

Spiff,

 
As Ricky so often said: "splane, Lucy!"
 
Thanks...!
Jun 23, 2008 7:26 pm

i'm sure glad i left 4.5 years ago. that's the difference between having built a 15 mill fee based book now, vs.  having to start building one today had I waited for good ole EJ to intro a fee based program. I'm sure as hell glad I trusted my insticts on that one. my life is a whole lot easier today, and EJ speaks with forked tongue.

Jun 23, 2008 7:42 pm

If you are starting new at Jones and you actively use this platform how are they going to determine your rolling average and gross?

Jun 23, 2008 9:33 pm
Joe2121:

If you are starting new at Jones and you actively use this platform how are they going to determine your rolling average and gross?





This is the scary part. It's the chicken-and-egg conandrum. I think once Jones sees how much activity goes through the program, they will re-evaluate the production-only goals for new FA's (in other words, give credit for building fee-based biz). At some point, I can see some sort of bonus system for adding annuitized AUM. Otherwise, nobody other than veterans can afford the program (maybe they're OK with that). But, like the program itself, the change will take time.

Jun 23, 2008 10:43 pm

Broker24- The whole reason that the program was EVEN introduced was to keep the veterans happy.  They are going to be able to transition those A share portfolios where they were getting 25 BPS and now get 1.00- 1.35 BPS. It was not even a consideration for younger brokers, it's all about revenue...... I was talking to one of my former buddies who is still at the Green Empire and he tried to tell me that the all in cost to client was 1.35%. Once I explained to him that you add to that the expense ratio of the fund or etf to the 1.35% to get the cost. He is a broker that has been out 6-7 years and makes that mistake, what is the average Eval/Grad person going to do?  Scary, scary.

Jun 24, 2008 12:03 am
noggin:

Broker24- The whole reason that the program was EVEN introduced was to keep the veterans happy.  They are going to be able to transition those A share portfolios where they were getting 25 BPS and now get 1.00- 1.35 BPS. It was not even a consideration for younger brokers, it's all about revenue...... I was talking to one of my former buddies who is still at the Green Empire and he tried to tell me that the all in cost to client was 1.35%. Once I explained to him that you add to that the expense ratio of the fund or etf to the 1.35% to get the cost. He is a broker that has been out 6-7 years and makes that mistake, what is the average Eval/Grad person going to do?  Scary, scary.

 
So how are you (EDJers) going to explain this to the clients? 
 
So, Joe, we bought these funds 5 years ago, and remember how I explained the whole upfront commission and that we would essentially break even after 5 years and then have really low fees and expenses from then on?  Remember that...yeah?  Well, now we're going to tack on an extra 1.35% per year on your account because I want to get paid to service you.
 
Is it just me, or does anyone else see the opportunity here?  If you have EDJ prospects on your list, wouldn't you call them now and tell them this just to put it in their ear?  It seems that it might be a good way to drive a wedge.