EJ - Fined $75 mil...again

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Jul 16, 2007 5:51 pm

Looks like EJ got another big fine from the SEC in a Friday announcement:


http://sec.gov/litigation/admin.shtml


I guess they just can't shake the Revenue Sharing thing I started.
Jul 16, 2007 6:12 pm

You're an idiot.  If you would have read the release instead of jumping to conclusions you would see that it is an amendment Jones filed for that caused the re-release of the original filing. 


Jul 16, 2007 6:23 pm

Prior to the late 1980s, Edward Jones had internally designated
certain of the mutual fund families with which it had selling
agreements as “recommended.” In the late 1980s, Edward Jones approached
certain of those mutual fund families (“Preferred Families”) with which
it had long-standing relationships and sought to obtain revenue sharing
from them. Edward Jones set an internal revenue sharing target of 25% of the advisory fees
earned by those mutual fund families on the mutual fund assets purchased
or held by Edward Jones’ customers, plus in most instances sought an
equity interest in their advisers or distributors.



Prior to the late 1980s, Edward Jones had internally designated certain
of the mutual fund families with which it had selling agreements as
“recommended.” In the late 1980s, Edward Jones approached certain of
those mutual fund families (“Preferred Families”) with which it had
long-standing relationships and sought to obtain revenue sharing from
them. Edward Jones set an internal revenue sharing target of 25%
of the advisory fees earned by those mutual fund families on the mutual
fund assets purchased or held by Edward Jones’ customers, plus in most
instances sought an equity interest in their advisers or distributors.



8. Edward Jones’ distributed 11% to 12% of its net income,
which includes net revenue sharing, to its limited partners and 10% to
12% of its net income to its subordinated limited partners each year
and the residual is distributed to the general partners.
Thus, the majority of any revenue sharing received by Edward Jones,
after operating expenses, was distributed to the firm’s general
partners, some of whom make decisions regarding which mutual fund
families become “Preferred Families” and others of whom are Edward
Jones IRs who recommend the Preferred Families to their customers.
During 2003 alone, the revenue sharing received by Edward Jones was equivalent to 33% of the net income of Edward Jones’ parent holding company, Jones Financial.



11. For example, during the relevant time period, Edward Jones’
Director of Mutual Fund Marketing described his “greatest contribution
to the Firm’s bottom line” as “the Department’s ability to continue the
focus on selling preferred fund families and the subsequent leverage
this gives us to negotiate revenue sharing programs with vendors.” He
also represented to the IRs that Edward Jones directly passes the
revenue sharing income along to the “IRs who did the work to get the
money in the first place.”


Jul 16, 2007 10:14 pm

So, if the limited partners are getting the high number at 12%, and the subordinated partners are getting the high number at 12%, then that means the GPs are getting no less than 76% of the revenue sharing pie.  And there, ladies and gentleman, is the meat and potatoes of the $75 million settlement. 

Jul 16, 2007 11:53 pm

I just know what the Investment News reporter told me.  I thought it was odd that the fine was the same as last time so I emailed him and asked...I really didn't want to read the whole thing... I thought that was his job.  Go talk to the Inv. News reporter.


My apologies Spiffy...I am an idiot...but then again...you're still at Jones...hmmm?

Jul 17, 2007 9:43 am

Thanks for the salt in the wounds, is what Spiffy should have said. I love this stuff.  GP"S SUCK...and they suck cold hard cash out of the IR and the investors.  Please read and understand all you Jones IR's and newbies and people looking to go to Jones.  This firm tries everyday to cloak its true objective...MAKE AS MUCH MONEY FOR THE GP'S AS POSSIBLE...that's it..no more no less.

Jul 17, 2007 1:42 pm

I am ok making 250k a year with no risk.  Weddle and the other GP's make millions; ok by me.  Someones gotta run the firm.

Jul 17, 2007 1:52 pm

Spears are you a democrat?  Cause I'd swear that if we were talking politics the thoughts you have on how the money at Jones should be shared would sound very democratic.  I think they call it wealth redistribution.  Take the money from the rich, give it to the poor so that everyone is equal.  Never mind that the rich have put years of blood, sweat, and tears into building the business to what it is today. Never mind that they have their own dollars at risk in a company they believe in.  How dare they make more money than me.  Surely they don't work any harder than I do or deserve it more.  In your office, does your secretary make more, less, or the same amount of money as you?  Why don't you take a larger cut from your net and give some more to her?  I think that would be fair to her.  After all, she's a part of your business too and she deserves to make more than you pay her.


For all the kool aid drinking you guys say we Jonesies do, you've had your fair share of it from the other side.  It's just a different flavor.  

Jul 17, 2007 1:55 pm

I am ok making 250k a year with no risk


How do you figure that you have no risk?  You don't have any E&O insurance.


You run the risk of having zero income every month.  You have the risk of changing administrative policies that are beyond your control.   You have the risk that the markets are going to take a header and your clients will hate your guts.  You have the risk that interest rates could rise and devastate your client's bond holdings.


Life is full of risk.  If you think you have none and are blithely skipping through life...tra la la....I wouldn't want you to be my advisor.

Jul 17, 2007 2:08 pm

Skippy, Are you high?

Jul 17, 2007 2:19 pm

I hope not...I hope your on remote access in front of a 85 yr old widow, telling her what a great investment the 15 year muni would be for her..I'd say 50% of the GP's don't due squat...brought in from the good ol boys railway..If your not smart enough to see a huge majority of the revenue flows to the privileged few, well so be it..you're a dumbass. Keep preachin and one day, yes one day, you might be asked onto the train.  Considering my assistant makes a few dollars more per hour than she was at EDJ, and MY pay has more than doubled, I'd say its a win-win. Your a poor, uninformed network marketing wannabe...good luck and good selling.

Jul 17, 2007 4:54 pm

bunny,


I have been though a market crash 200-2002 and was just fine.  Stressed?  Sure.  we all were.  I have been through clients getting statements and have bonds prices down 10-15%.  Fine again.  Finally, I dont start the month at zero.  If you are implying that i dont have fee based, that's ok too.  I am not against it, so I would agree that it's ok for some clients.  My point was the GP's take all the financial risk for Jones.  For that, they should be paid.  They are the owners!!  Most on this site say that indy is better b/c now you are an owner.  Well, i gurantee you no one on this site makes $10M as an owner.  Oh by the way, i would also bet that if you are Indy and you hired another advisor down the road, you would be giving that new person a payout of their gross.  They would not own 50% of your practice.  As soon as you do that, you are now a GP.  You get a cut of your advisors gross.  SO, dont bitch and gripe about owners making all the money if you are not prepared to expand your practice by taking on equal partners, even if you are the one who started the business.

Jul 17, 2007 5:12 pm

SO, dont bitch and gripe about owners making all the money if you are not prepared to expand your practice by taking on equal partners, even if you are the one who started the business.


You must have a reading comprehension problem.  I was merely pointing out that your statement that you don't have any risk was a bit on the ...ok a lot ....on the wrong side.


As to starting the month at zero: I don't count trails.  Unless you have enough people dollar cost averaging to make a significant amount of commissions, you are basically starting at zero....as are most of us.  Nothing wrong with that, but it is a risk. 

Jul 17, 2007 5:26 pm

Bunny,


I guess i meant more on financial risk side of Edward Jones.  We all have the risks you stated.  Since the GP's assume more financial risk, then they should make the most money, correct? Risk VS Reward.

Jul 17, 2007 5:30 pm

Its an LLC....changed back in 96....so NO they don't bear all the risk.

Jul 17, 2007 5:42 pm

For the sake of this discussion, lets agree they have more risk than I do.

Jul 17, 2007 8:26 pm

haha, so the people higher up on the totem pole make more money?  shocking new concept there.  unlike all the CEO's of public companies who only look out for shareholders right?

you guys take your hatred of Jones and apply it to most any industry concern.  I was there, have left there recently, but cannot see the point of being so freaking bitter day in and day out.

Jul 18, 2007 12:46 am
Spaceman Spiff:

  Never mind that the rich have put years of blood, sweat, and tears into building the business to what it is today. Never mind that they have their own dollars at risk in a company they believe in.  How dare they make more money than me.  .


Spiff, while I was at Jones I met GPs such as Greg Dosman.  That guy had exactly zero blood, sweat, or tears into any business.  He did not deserve to make one dollar more than me on his best day and my worst.  That, my friend, is an absolute fact.  And that fact is what drove me from Jones. 

Jul 18, 2007 12:52 am
Jul 18, 2007 12:55 am