Ethics when transitioning

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Jul 8, 2005 2:39 pm

Ok folks-


You have been a goodknight for 6 months and the veteran IR is asked to come to home office as a GP. Because you have so little experience to handle a 150M+ book, two other reps come to town and split the book 3 ways. Average is 60M roughly.


Two and a half years later you and your cohorts in town have built your book to almost 80M each and are recognized as a top producers in your region. Is it ethical to assume that you could leave, go independent, and take as much as 50% of the book (industry average I am told). Should they have any allegience to the firm that put them in that position?


This is an issue facing our industry that all sides have created. My question isn't who is right or wrong, but is it ethical?

Jul 8, 2005 3:09 pm

Everyone has to sleep at night, and that is each IRs choice.


But the real question is...  after two and half years do the clients feel that they are clients of the brokers or the firm.  After 2 1/2 yrs, I think there still may me an allegiance to EDJ.

Jul 8, 2005 3:29 pm

Just a few questions for you.


1.  Who knocked on all of the doors introducing themselves to total strangers?


2.  Who prospected in the country and let farm dogs piss all over their tires and jump up on them with muddy paws?


3.  Who worked nights and weekends conducting seminars and calling prospects?


4.  Who defended the American economic system when the market went to hell?


5.  Who got drug into the mud by your employer's bad ethics?


6.  Who's clients are they?


You will take more than 50% if you are skillful.

Jul 8, 2005 3:36 pm
7yrvet:

Ok folks-


You have been a goodknight for 6 months and the veteran IR is asked to come to home office as a GP. Because you have so little experience to handle a 150M+ book, two other reps come to town and split the book 3 ways. Average is 60M roughly.


Two and a half years later you and your cohorts in town have built your book to almost 80M each and are recognized as a top producers in your region. Is it ethical to assume that you could leave, go independent, and take as much as 50% of the book (industry average I am told). Should they have any allegience to the firm that put them in that position?


This is an issue facing our industry that all sides have created. My question isn't who is right or wrong, but is it ethical?



Who has already been paid 61% of the gross commission earned by selling to these customers?  Who has gotten 61% of the trails?  Who has taken the proceeds of haircuts on any annuities sold to any of these customers?  Was the former broker paid anything for book of business? 


How then can EDJ claim ownership of these same customers?  I'd have to question the "ethics" of a company that tried to claim the moral high ground on this issue.

Jul 8, 2005 4:34 pm

In these cases I have heard that Jones puts a little more fight than if the broker started as a true new/new.  That being the case, whatever you keep after the dust settles is yours...... guilt free.

Jul 8, 2005 6:18 pm

7yr you need to talk to some people outside the cult to get a real perspective.


Those guys that left jones have their own work ahead of them since they did not do it originally by building their books themselves.


But just like the jones guy said in the newspaper article "the way the three left is the industry standard in the competative financial trade."


As for being recognized as top producers in the region,  this is classic Jones [email protected] More and more clones are seeing this.


This is why Jones will some day be a very profitable indy firm under the umbrella of Goldman or Citi, or some other wirehouse.  Only then will the IRs stop leaving because they finally will get a payout that is competative.


Business is business.  This is not an ethics issue.


As for allegiance to Jones... Anyone who started at Jones and left could feel bad because EDJ underwroter their business and paid the bills until they were profitable.  However this is a free country and we are slaves to no one.  Jones needs to figure out how to keep people once they are making good money.


As long as you are at Jones you are a sharecropper.  Harvesting your crop on another mans land.  Land you have no rights to.


Where's the ethics in that?

Jul 8, 2005 7:26 pm

GP-


I can't wait  o tell tell my next client that my new montra is business is business. That my ethical behavior doesn't matter and that I have to be paid 20% more because I should be able to make more if it is available. After all it is a free country.


If you don't have ethics above payout, you can not help but lose in the long run.


Just my two cents. I have no LP, am a new new. I have never been given anything.

Jul 8, 2005 7:42 pm
dashampersand:

Just a few questions for you.


1.  Who knocked on all of the doors introducing themselves to total strangers?


2.  Who prospected in the country and let farm dogs piss all over their tires and jump up on them with muddy paws?


3.  Who worked nights and weekends conducting seminars and calling prospects?


4.  Who defended the American economic system when the market went to hell?


5.  Who got drug into the mud by your employer's bad ethics?


6.  Who's clients are they?


You will take more than 50% if you are skillful.



I think Dash has covered some of the same ground I have -- Fortunately, the mud from dog paws tends to come out at the cleaners.


I've moved my book five times, and they all came with me, every time. I've heard some wirehouse reps talking about attrition, because their former manager handed out their book as "leads" to other RRs.


Bottom line is if you sold yourself, instead of the firm, they will come with you. I never sold the company, because I was fortunate enough to have managers that taught me Rule #1.

Jul 8, 2005 8:00 pm

If they didn't feel "unethical" for being accoladed as "top producers" when they were handed the assets on a silver platter, then why would they feel unethical about taking those same unearned assets with them.  Unfortunately, the goodnight program and the false praises heaped on the fortunate few tends to corrupt and distort reality in the minds of the goodnight reps.   It also causes a great deal of resentment in the rest of the brokers who started from zip nada bumpkis to build an office.


I have no respect for someone who takes the gravy off the situation without having had to sweat for it.  But since Jones indiscriminately doles out the gravy, I guess they felt entitled. 


The true test of course will be how many of the original Rep (William's) clients feel loyalty to EDJ or will go with the new firm.

Jul 8, 2005 8:32 pm

7yrvet- I couldn't agree with you more.


Roger- The fact that you moved 5 times and they ALL moved with you time is really quite a record. You and Wilt Chamberlain are something else, I am in awe you stud!!!!


Jul 9, 2005 12:42 am

looney is right. there is tremendous resentment from those of us who earned every client to see those who were given 20mm plus lauded as heroes. scuttlebut is, if you leave and stay in touch with your jones buddies, you could come back when a big branch opens up. never mind loyalty to those who stayed. 

Jul 9, 2005 3:07 am
noggin:

Roger- The fact that you moved 5 times and they ALL moved with you time is really quite a record. You and Wilt Chamberlain are something else, I am in awe you stud!!!!


Wilt and I have something else in common. Two things, in fact.


But neither have anything to do with moving books, but with tapping arse. And swingin' wood! 

Jul 9, 2005 12:51 pm

Lets talk ethics?  One of my favorite subjects ESPECIALLY when it comes to Edward Jones. 


Does Jones "Always" do what's right for the clients?


-SOMETIMES


I am a former EDJ IR and I was very successful, well respected, and I still think Jones is a great company for some.


I would compare Jones to the mom and pop ice cream shop where you can go in and can buy  vanilla, chocolate, and if you are really lucky a swirl ice cream cone.  For clients who just want plain vanilla (7 fund companies, a few annuities, very little insurance options, and very basic financial planning capabilities) it is a great place.  Jones knows who their market is and they cater to it with Vanilla and Chocolate.


Now ask yourself would my clients be better and more satisfied at Baskin Robbins where you have 31+ flavors.  You still have the chocolate and vanilla, but more options to get the EXACT mix the client "NEEDS" and you have more experienced professionals with the tools necessary to create the perfect product.  Where do you think your clients are better served?  You know the answer you just do not want to admit it.  Jones has convinced you chocolate and vanilla is what is right for everyone.  That is not the case, especially for the high net worth clients. 


Is it ethical to serve the client something just because that is all you have to offer, or is it YOUR job as their financial representative to provided them with ALL the necessary tools for their financial needs?  And don't tell me chocolate and vanilla is all they need.  If you have to question whether it is ethical to take the accounts from Jones you probably should not make the move, but you have to understand if you pick the right firm to go to it may be unethical not to.  Do you work for Edward Jones or your clients?  That's the real question.  If you say Edward Jones then you need to get an ethics check.  The paycheck comes from EDJ, but your clients provide it.  You owe them the best.


Second ethics question for Jones.


In 2002 when you were working your tail off and provided Jones with a profitable office WHERE WAS YOUR BONUS????  The GPs still got a hefty return on their partnership thanks to your hardwork.  If you look at some of the top partners pay in 2003 and 2004 it increased almost 40%.  Did your bonus bracket increase that much. NO NO NO.  You just had a good trimester bonus for one reason.  THERE ARE A LOT OF EXPERIENCED JONES BROKERS LEAVING.  I would imagine return on GP could be lower next year because of this.  My questions is did they increase the bonus bracket because they know by taking these extra returns they were keeping bonus money from their employees or did they do it because so many experienced brokers have been leaving?  What is ethical?  Had this happened in 2002 maybe return on GP capital may have been down and bonuses would have been paid to hard working brokers and their families.  Again what is ethical.


I think I made two good points in regards to your question on ethics.


1.  Is it ethical for you to make the move for your clients.


2.  Has Jones always treated you with the highest ethical standard.


Ultimately you have to decide. 



Success is when you just smile.

Jul 10, 2005 10:34 am

Uptick-


Excellent points. But I believe you proved mine. So many on these forums are SO angry at Jones, for whatever reason you want to choose, that broker ethics are secondary to how they were treated.


We are in the integrity business. When or whatever challenges our reputation tarnishes all of us. Image is everything. In my opinion we have to do a better job of managing our behaviors.


Jul 10, 2005 10:58 am

I am not SO angry at Jones, just disappointed. 


However, isn't it a part of ethical behaviour to want to do the best job that you can, and provide the highest level of service you can to your clients?  If leaving one employer (Jones) and choosing another that allows you to accomplish this, is that unethical.   Should the advisor's allegiance and duty be to the company or to the client?

Jul 10, 2005 12:31 pm

Babbling-


Why is it that now that you are indy, you want to do the best job you can and provide the highest level of service. Certainly you had the same principles when you were at Jones.


The financial planning tools aren't the best, the technology is outdated, the breadth of inventory,etc. I understand and agree with most of the things lacking. But I have never felt compelled only to offer the preferreds, and don't. And I have never had a conversation with any GP about my mix of products. So...I feel a little differently, that I am offering the highest level of service and the products that make sense for the ideal client in our branch. I know the indys call me naive (Zacko) but I think we are formidable with our business model. Maybe as the production and assets grow I may change my position.


Regarding the thread, in my view, it would be ethical for the reps who went indy to LEAVE their book and start over. Now that would be noteworthy. Had it not been for the rep who was there 10 years previous, none of them would have dreamed of moving to an isolated town (three hours from an airport) for the assets.


Babbling makes another  appropriate observation that goodknights and office takevoers have an inflated opinion of themselves (in general). Jones did create it so some of the fault lies there, but as I tell my kids often "it doesn't matter what happens as much as how we react to it." Trust me when I say that many cringe when these sudden stars  are recognized for their production compared to reps who start with nothing.


Life in the financial services world isn't fair. As far as I can tell, that is true in other industries as well. Again I want to applaud all those who feel that leaving Jones or any large firm has made a substantial difference in their business. All too often unfortunately, it comes down to payout and sometimes that's when ethics are thrown out the window.


Last item- The client has to come first. Always.

Jul 10, 2005 3:04 pm

Why is it that now that you are indy, you want to do the best job you can and provide the highest level of service. Certainly you had the same principles when you were at Jones.


Of course I had the same principles when at Jones.  That is why I was able to realize after a while that Jones did not offer me the ability to meet my client's needs at the level that I wanted to be able to offer.  In order for me to do that I needed to go indy where I can bring a full array of financial products and services.  As I have stated before there are many fine people who work at Jones and who are perfectly happy with the company.  More power to them. Others, like myself prefer to be independent.  Just my nature I guess.


As to the ethics of the Jones guys who left in Fort Bragg, we don't know if they went there because the lucrative Jones office was already there or not. (probably they did but we can't be sure).  I imagine that they also created new clients and expanded the assets of those clients that they inherited in the years that they worked in the offices.  There is nothing unethical about starting your own business and having clients that are loyal to you follow you. What would be unethical is if they were to bad mouth the company they were leaving or denigrate the new reps who are taking over the office.   The clients will decide where they want to do business.  That is their right.

Jul 11, 2005 12:42 am

Uptick, define "a lot of experienced brokers leaving" cause I don't see it. Not in the reigon I am in or the others I talk to. Don't give me the crap that Jones is hiding it because we brokers like to talk. Sure, I hesr of those leaving from time to time, but "a lot"? NO, I am not seeing it.

Jul 11, 2005 10:32 am

Jones is losing about 2000 brokers per year and hiring about 2000 brokers per year.  Not really getting ahead very much these days with the "healthy growth" concept . 


Seg 4's are probably 300 per year or so of the 2000 if stats have stayed consistent.  What has surprised me is that more haven't left.  Considering the Jones opportunity and what it has deteriorated to for the typical vet--you have to give Jones credit where credit is due.  They have found a way to get vets to volunteer their time for FREE to train new people, interview people with no pay, and mentor others without compensation...and yes EVEN recruit competitors for their own town without compensation.  All this while paying reps on a net/net basis less than the industry average while giving them fewer products to offer..   Top brass at Jones continues to get more from their reps than they ultimately deserve. 


Please don't compare Jones to indy--it's not fair to Jones.  It's almost laughable.  Compare it to a wirehouse--where an employee relationship exists with comparable payouts and bonuses. 

Jul 11, 2005 11:40 am

Zack, you are slightly off on your seg 4 numbers. What "STATS" are you referring to? Because the numbers I have seen, and witnessed would be closer to 150 seg 4 IRs per year. Which I would put that number up to any other firms at that level of production.