Could someone give me the rational behind preferred fund families beside the obvious rev sharing benefits to the firm.  I mean, how does this benefit the client?

Don't you know why?  Because those funds are leaders in every asset class which is why their A share focus just makes so much sense.

Hopefully my sarcasm is evident.

I foresee the battle with A share v C share or fee based coming:  Let me ask a couple questions.

1.  As an advisor, do you feel that for all you do for your clients and building and protecting their portfolio a fair compensation would be say....25 bps?

2.  What book of business would you rather own:

A book that holds 1000 clients, $80 million in AUM and a net of say $325,000.        &nb sp;        OR

A book with 200-250 clients, $50 million in AUM and a net of $300,000?

CS, you are saying what is best for the advisor, what about the clients?

Zack, I have had my 65/66 longer than you have. All Jones IRs will have it by June 2006. I meet with vendors all the time that are not "preferred" As to your LP offer outsaide of the offering period, well, I'll call you on that one as it doen not happen. But, you nor I can prove it. As to offering a GP to outside people? Yes, that happens. Michael Holmes being a great example. he did wonders for our firm. You guys do it too, only you call them options.

What makes you think I am "stuck" here? Deferred comp? Yes, I have a lot but paying taxes is a good thing if I find a better deal outside of Jones. (SSB offered to increase my "bonus" to cover the taxes if I came over.) So stuck? NO.

Guest 1 - I can’t believe you would ask such a dumb question.  You definitely don’t get it.  Tell me how having 1000 clients can in any way be in the best interest of your clients.  You can’t possibly service them like they deserve.  Having a book of only 200-250 clients gives you the ability to service the hell out of them.  You really kill me with that question.  And like I asked earlier on a different forum…how much of your business do you structure to make sure money comes due and you can reinvest for some more commission.  That is the product of your beast you affiliate with and the problem with their restraints on your business.  Wake up, my questions proposed are exactly for the best interest for the client.

I didn't know about the 65/66.  Is Jones an RIA then?  I'd imagine they would have to be.  My apologies.  I also had to take the series 9 and 10 in addition to the 65 ( I found out later that I could have received exemption for the 65--but no one ever told me)

SSB couldn't pay me enough to go there.  Nor could ML or any of the wires.  In the long run you can better serve your clients as an indy and actually make more money net with the higher payout.  It was always flatterring to get calls/offers from BOM's at the various wires.  Interesting that I haven't received ONE offer or call from anyone since having gone indy?  Funny how that happened...bc when I was at Jones I'd get a call every other month.

csmelix,  I'll bet Guest1 has over 1000 clients..unless he decides to help a new broker out and give him/her clients which is often encouraged at Jones.  I am back up to 825 acct's and approx 500 HH's.  I still accept anybody..and that may never change.   I do however agree with you 100% on a smaller fee based book is better on many levels than a larger comm based book.  Better for both the client and the advisor.  It's getting there that I have the problem with. 

CS, I don't recall answering your question. Only to say (quite typically I might add) is that the only thing you really harped about was YOU the advisor making money. You did not say a word about the clients best interest. but don't worry, Zacko is a much better writer and covered your mistake.

Zacko, I have less than 500 HH and slightly more than 300 HH. I agree with ML or SSB. Just pointed that out because someone insinuated that I was STUCK at Jones. 500 HH is too many and if you are accepting anyone as you say, what service can you honestly provide?

[quote=csmelnix]Guest 1 - I can't believe you would ask such a dumb question.  You definitely don't get it.  Tell me how having 1000 clients can in any way be in the best interest of your clients.  You can't possibly service them like they deserve.  Having a book of only 200-250 clients gives you the ability to service the hell out of them.  You really kill me with that question.  And like I asked earlier on a different forum....how much of your business do you structure to make sure money comes due and you can reinvest for some more commission.  That is the product of your beast you affiliate with and the problem with their restraints on your business.  Wake up, my questions proposed are exactly for the best interest for the client.

The "ideal book" of 200 - 300 clients is BS. There are very few Superbrokers, or retiring vets, who can actually play that game. This is an idea spread by losers who do inspirational seminars to our industry, and are completely out of touch with being a retail broker. Don't believe everything you read and are told.

Not all clients want service. Give me 2,000 $100,000 accounts of "c" share business (that's 2 milly a year), that only need a phone call, 3 times a year. These people don't want to get together. Don't get me wrong - I am all about servicing my clients & no, I don't really want 2,000 $100,000 accounts, but I can appreciate how this is valuable business. I will add this type of account to my book all day long.

The whole industry has gone so overboard on trying to be all things to all people. Yes, we have come a long way from pushing product, and the relationship is sacred. But, be independent thinking enough to recognize that, a big chunk of your clients see you as there broker, and nothing more. They don't want you at their daughters wedding, nor do they want to run their checking account and mortgage through you. Some....yes, and you might try to develop deeper relationships.....but having 1,000 clients that  get adequate service, and good solid investments is fine.

Anyone who has been doing this long enough, knows that you can kill yourself servicing a client, get them great returns.......and they will still dump your ass, when the time comes. 

Do your best, be ethical, don't get too attached, Love the clients that love you, and for god's sake - don't be ignorant enough to think that a $100,000 account (that does not take up a ton of time) kickin you $1,000 a year in fees....is not good business...it is!! There are million dollar producers everywhere, with $500,000 accounts that do $175 in Production - now that's crap. 

[/quote]

A book of 200-250 clients with an average account size of 200k is unrealalistic?  Not if you have focus, an ability to market to such a niche and be persistent in your approach.  What's BS is just throwing up your hands and saying it can't be done. 

By the way, was curious just to pose the question to see the thoughts.  I for one don't want to 1000 clients because I don't want the tail wagging the dog.  I am sure the business model is pretty dependent on the demographics of one's area but to say it's impractable is moronic. 

Preferred Funds and why?

There are numerous reasons why a firm would pursue preferred funds that go well beyond profit sharing and though most on this board will say I'm full of it, Jones would probably continue to have preferred funds even without profit sharing.  The logic is simple.  No broker can be an expert on everything.  By using preferred funds, the sales force can focus on learning perhaps 200 funds in the preferred families rather than be out there just listening to wholesalers from 200 families showing them thousands of funds. 

Even the best brokers on this forum will tell you that they focus on a handful of funds primarily because they don't have time to work hundreds.

Secondly, in Jones' case is the fact that the fund families sold by Edward Jones are researched constantly by a Product Review department that keeps check on them.  Believe it or not, Product Review actually has in numerous cases declared specific funds even within those families to be 'non-preferred'.  There were numerous internet funds in the late 90's that Product Review restricted as they felt like they were not in the best interest of our base clients even though there was tremendous pressure from the preferred families.

Thirdly,  We all learned to sell a mutual fund at some point...Imagine the problems that Jones would encounter if it did not use preferred funds in training and allowed each class to just pick one at random.  Training would be a nightmare.

Fourth: Operationally, it is a good idea for any large brokerage to focus their efforts on funds that are willing to cooperate with the Service and Operations departments of large firms.

Fifth:  Control over Wholesalers activities and the ability to oversee that those wholesalers who practice unethically are disallowed in our system.

Sixth:  Customer information from funds.  Sure is a lot easier to get cost basis info and other information from a preferred fund.

I could go on and on, but that gives you some of the rational for preferred funds that goes well beyond profit sharing.

Truth is, just about every broker I know has preferred funds.

Guest1,

You must have done at least one if not two Goodknight programs. 

My top 200 HH's get outstanding service and I try to stay in touch with the others once or twice a year.  I just have never been one to set minimums as such.  I have fired 500k clients and stayed late to meet with someone who has 50k because they needed my help and I liked them.  They never get ignored or mistreated at my office.  I am very familiar with the 80/20 rule and what all the "business experts" tell me I should do.  Maybe one day I'll hire a broker who will assist me in servicing those clients....but maybe not.  I did leave about 6-8 million back at Jones which was nearly all small accts. 

I did forget I have about 100 SIMPLE IRA participants which were included in the 500HH's.  SO, it's prob closer to 400HH.

Zacko,

Great comments - the 80/20 rule is a great point when considering my earlier statement on the 200-250 clients v the 1000 +.  Take your 1000 client book and I will bet my left *&$ that 80% of your production comes from roughly 20% of your clients - you do the math and there's your A clients of roughly 200 or accounts.  The comments guest 1 makes about money and all I comment about is my benefit and not the advisor is just stupid.  When you have big brother managing your margins for you, it's a luxury you can afford.  But when you own your own business you actually have to plan to run it and you have control of your margins which is why indy is such a better value proposition for advisors that have the ownership mentality.  The result translates over to a better value for the client as well.  I can actually build a real plan for my clients here and can measure how well they are or aren't doing.  I actually have software to measure performance toward achieving their goals that show true metrics.   I am happy to say it's much more detailed and incorporates a greater deal of variables than the old pyramid and % of the classes with in does at Jones.  I can show rates of return across many different time parameters, risk adjusted returns, v over 35 benchmarks, realized gains/losses and on and on and on...my clients walk away with a true picture of performance and how well their plan the WE put together is working for them.

When you don't have to have over 1000 clients (I do mean HH) to grow your business you can actually spend the time to do this and bring real value to your clients - that's what it's about. 

[quote=csmelnix]

Zacko,

Great comments - the 80/20 rule is a great point when considering my earlier statement on the 200-250 clients v the 1000 +.  Take your 1000 client book and I will bet my left *&$ that 80% of your production comes from roughly 20% of your clients - you do the math and there's your A clients of roughly 200 or so accounts.  The comments guest 1 makes about money and all I comment about is my benefit and not the client is just stupid.  When you have big brother managing your margins for you, it's a luxury you can afford.  But when you own your own business you actually have to plan to run it and you have control of your margins which is why indy is such a better value proposition for advisors that have the ownership mentality.  The result translates over to a better value for the client as well.  I can actually build a real plan for my clients here and can measure how well they are or aren't doing.  I actually have software to measure performance toward achieving their goals that show true metrics.   I am happy to say it's much more detailed and incorporates a greater deal of variables than the old pyramid and % of the classes with in does at Jones.  I can show rates of return across many different time parameters, risk adjusted returns, v over 35 benchmarks, realized gains/losses and on and on and on...my clients walk away with a true picture of performance and how well their plan the WE put together is working for them.

When you don't have to have over 1000 clients (I do mean HH) to grow your business you can actually spend the time to do this and bring real value to your clients - that's what it's about. 

It's about fixing my typo's too.

[quote=proudlp]

Preferred Funds and why?

Secondly, in Jones' case is the fact that the fund families sold by Edward Jones are researched constantly by a Product Review department that keeps check on them. LOL Believe it or not, Product Review actually has in numerous cases declared specific funds even within those families to be 'non-preferred'.  There were numerous internet funds in the late 90's that Product Review restricted as they felt like they were not in the best interest of our base clients (cough...VOYAGER... New Century...) even though there was tremendous pressure from the preferred families.

[/quote]

Oh. Thanks

Now, how does a fund comany get on this list?  And once on what are the criteria for getting removed?

Proudlp,

Do you realize that every one of your reasons for defending preferred funds, relates to a benefit for Jones. Ease of training, Flow through your back office and being overburdened by too many choices?????? These are the worst reasons to have limited investment choices, and not very client centric..........In fact it might border on malpractice.

I have to add, re-read proudlp's defense on prefered funds, and you will find the answer to the often asked question......"Why do so many ex-Jonesers bad mouth the Company."?

If your research department truly filters out funds.....how the hell have Putnam, Federated, Hartford and Goldman kept there membership. There are only about 50 other fund families out there that offer more diversity in size - style and sector, with better fees and track records.

Jones Monitors the wholesalers activities for ethical behavior!!!!!.........excuse me I had to wipe off my screen, because I threw up!!!!! Do you really believe the crap that your spewing?????

Moneyadvisor

Beautiful!  Summoned it up beautifully.  You have to ask - who are you building a business for yourself or the home office.  You want to see real manager reviews done, look at what LPL's research department does on that end - value added that costs .10 cents on the dollar v .62 cents., and it crosses the spectrum of fund families - that's right more than 7.  They even go as far as building out recommended asset allocation models and recommended funds, some that are even....NO LOADS and don't provide assistance to their advisors or their firm.  That sounds non-bias to me and a costs that is hard to argue.

MA - I loved your comments.

I have to agree with cs and ma here.  My experience at LPL is the same.  It seems to me that to truly justify A share pricing and limited fund families, that only the families with the broadest offerings and best track record should be offered.  I generally like the company, but I don't think Lord Abbett fits the criteria that best suits investors, when it comes to A shares, breakpoints and diversification.

When Hartford and Goldman were added as basically new fund companies with fairly limited offerings, how did Product Review rationalize that.  The only one I can think of is the companies willingness to pay for shelf space, because there are a lot of other companies that seem more qualified.  Can't believe it took as long as it did to bring on Franklin Templeton.

BTW, I have been told by wholesalers now that they were only allowed to call on IR's if the broker dropped a ticket first, unless the wholesaler was from a preferred fund family.  So the theory that IR's truly have access to other fund families is flawed at best.

Is it true that in order to enroll in a managed account at EDJ that it has to be $500k or larger?  I thought I heard that somewhere and didn’t even know they had this as an option.

Guess you told me...

There is a complete untruth here though...If a wholesaler was told they could only call on an IR after their first ticket, this was not told to them by anyone in the home office at Jones.  Absolutely untrue...without a doubt.   This could have been the case with annuities as there are appointment issues at play there (I don't know about that one), but for Mutual Funds it is absolutely unequivocly untrue.  I don't doubt that there are wholesalers who have been told by their own firms things like that, but it did not come from anyone at Jones.  I can say that for sure and without question.

As far as preferred funds being a benefit to Jones.  Yup.  They are. 

They are for just about every company.  MA, do you claim to not have any 'preferred funds' in your portfolio?  I know nothing about you, but I'll bet your mutual funds are about 75% in 10 or fewer funds?  Let's be clear.  You may not like the preferred funds of Jones, but the idea of having preferred funds is global to all of us.

Exdrone -

Great point.....I want to like Lord Abbett, My wholesaler is a great guy, but there are many other funds who fill the spaces better.

BR,

That was the deal when I was at Jones...$500,000 was the bogey, and the wrap account was the best kept secret at the company. Nobody knew about it. I'm guessing just in time training would probably have pulled the curtain aside in year 10 or so.