IVY Funds/EDJ

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Dec 14, 2009 9:50 am

Intersting, I just got a call from my "new" whoelsaler at Ivy Funds.  He said they just inked a deal with Jones and now have dedicated wholesalers for Jones.

 
My guess is that Jones has seen how many assets are going into Asset Strategy (a lot of people in my region use it now), and they figured they needed to make sure nobody blew themselves up .
Dec 14, 2009 10:01 am

My IVY wholesaler is a former Jones rep. We have a fun time talking about the "good ole days" when he comes by for a visit.....

My name is Joe, my can sell date is ....., my office is in Timbuktoo.....and I am a Jonesaholic.....welcome Joe
Dec 14, 2009 10:30 am

I got the same kind of phone call from Fidelity.  I think it is partly due to Advisory and partly due to a lot of people looking for alternatives to American, Lord Abbett, VK, et al.  I think we all knew that once they opened the doors a bit with Advisory, the fund landscape at Jones would change eventually. 

 
I also think that mutual fund companies realize that if they can get a foot in the door at Jones, they're going to make some money.  With the number of advisors out there going to index funds and ETFs instead of traditional funds, those guys have got to be looking for any additional business they can get. 
Dec 14, 2009 10:44 am
Spaceman Spiff:

I got the same kind of phone call from Fidelity.  I think it is partly due to Advisory and partly due to a lot of people looking for alternatives to American, Lord Abbett, VK, et al.  I think we all knew that once they opened the doors a bit with Advisory, the fund landscape at Jones would change eventually. 

 
I also think that mutual fund companies realize that if they can get a foot in the door at Jones, they're going to make some money.  With the number of advisors out there going to index funds and ETFs instead of traditional funds, those guys have got to be looking for any additional business they can get. 

 
I think you nailed it. Jones is the last frontier for funds....
Dec 14, 2009 10:52 am
Squash1:
Spaceman Spiff:

I got the same kind of phone call from Fidelity.  I think it is partly due to Advisory and partly due to a lot of people looking for alternatives to American, Lord Abbett, VK, et al.  I think we all knew that once they opened the doors a bit with Advisory, the fund landscape at Jones would change eventually. 

 
I also think that mutual fund companies realize that if they can get a foot in the door at Jones, they're going to make some money.  With the number of advisors out there going to index funds and ETFs instead of traditional funds, those guys have got to be looking for any additional business they can get. 

 
I think you nailed it. Jones is the last frontier for funds....
 
Squash, most of the wirehouse advisors I know in my area utilize funds, ETF's, UIT's, and annuities, in that order.  Merrill Lynch is the #1 customer of American Funds.
Dec 14, 2009 10:59 am
B24:
Squash1:
Spaceman Spiff:

I got the same kind of phone call from Fidelity.  I think it is partly due to Advisory and partly due to a lot of people looking for alternatives to American, Lord Abbett, VK, et al.  I think we all knew that once they opened the doors a bit with Advisory, the fund landscape at Jones would change eventually. 

 
I also think that mutual fund companies realize that if they can get a foot in the door at Jones, they're going to make some money.  With the number of advisors out there going to index funds and ETFs instead of traditional funds, those guys have got to be looking for any additional business they can get. 

 
I think you nailed it. Jones is the last frontier for funds....
 
Squash, most of the wirehouse advisors I know in my area utilize funds, ETF's, UIT's, and annuities, in that order.  Merrill Lynch is the #1 customer of American Funds.
 
Yeah but that is hard to relate to because they have what? 16,000 advisors with average production around $500K, so twice what jones people produce with 6,000 more advisors or so.
 
Also i am willing to be a lot of those funds will be moving to managed accounts now that C shares are up for debate and that $100K accounts don't count anymore.
Dec 14, 2009 11:07 am
Squash1:
B24:
Squash1:
Spaceman Spiff:

I got the same kind of phone call from Fidelity.  I think it is partly due to Advisory and partly due to a lot of people looking for alternatives to American, Lord Abbett, VK, et al.  I think we all knew that once they opened the doors a bit with Advisory, the fund landscape at Jones would change eventually. 

 
I also think that mutual fund companies realize that if they can get a foot in the door at Jones, they're going to make some money.  With the number of advisors out there going to index funds and ETFs instead of traditional funds, those guys have got to be looking for any additional business they can get. 

 
I think you nailed it. Jones is the last frontier for funds....
 
Squash, most of the wirehouse advisors I know in my area utilize funds, ETF's, UIT's, and annuities, in that order.  Merrill Lynch is the #1 customer of American Funds.
 
Yeah but that is hard to relate to because they have what? 16,000 advisors with average production around $500K, so twice what jones people produce with 6,000 more advisors or so.
 
Also i am willing to be a lot of those funds will be moving to managed accounts now that C shares are up for debate and that $100K accounts don't count anymore.
 
Good points, although many of the guys I know are moving away from managed accounts (SMA's) and more towards ETF/Fund accounts.  Most are finding SMA's not performing as hoped, and are not easy enough to trade in and out of.  Also, tough to use SMA's for small accounts due to lack of diversification (and SMA minimums).  Do you really want to have 5 different managers handling $25K each?  That's why funds and ETF's will always be in vogue for smaller accounts (especially IRA's).
Dec 14, 2009 11:20 am
B24:
Squash1:
B24:
Squash1:
Spaceman Spiff:

I got the same kind of phone call from Fidelity.  I think it is partly due to Advisory and partly due to a lot of people looking for alternatives to American, Lord Abbett, VK, et al.  I think we all knew that once they opened the doors a bit with Advisory, the fund landscape at Jones would change eventually. 

 
I also think that mutual fund companies realize that if they can get a foot in the door at Jones, they're going to make some money.  With the number of advisors out there going to index funds and ETFs instead of traditional funds, those guys have got to be looking for any additional business they can get. 

 
I think you nailed it. Jones is the last frontier for funds....
 
Squash, most of the wirehouse advisors I know in my area utilize funds, ETF's, UIT's, and annuities, in that order.  Merrill Lynch is the #1 customer of American Funds.
 
Yeah but that is hard to relate to because they have what? 16,000 advisors with average production around $500K, so twice what jones people produce with 6,000 more advisors or so.
 
Also i am willing to be a lot of those funds will be moving to managed accounts now that C shares are up for debate and that $100K accounts don't count anymore.
 
Good points, although many of the guys I know are moving away from managed accounts (SMA's) and more towards ETF/Fund accounts.  Most are finding SMA's not performing as hoped, and are not easy enough to trade in and out of.  Also, tough to use SMA's for small accounts due to lack of diversification (and SMA minimums).  Do you really want to have 5 different managers handling $25K each?  That's why funds and ETF's will always be in vogue for smaller accounts (especially IRA's).
 
This would probably be easier if you just called me
 
As far as I can tell, all new accounts at wirehouses will be above $100K, and just in case my guess is closer to $200K...
 
Where as jones will continue to court the $25K-125K(nothing wrong with it). So there use of fund will go up or remain steady(considering even their advisory platform is funds).
 
Also when a fund wholesaler walks into a Jones office he is competing against, less people: Annuity wholesalers, jones bond department(we all know that is a joke), and edward jones stock picks..
 
When he walks into anywhere else he is competing against the following: ETFs, SMA, Managed Futures, Annuities, EIAs, Private REIT, etc..
 
He also knows that if he can hook a newbie, that is a lifeline for his business, because newbies only sell a couple of things.
Dec 14, 2009 11:45 am

Look at it from a fund wholesaler perspective:

Wirehouse- 5-25 brokers in one spot.
Jones- 1 broker
 
I know at my firm we have 3 producers when someone comes to visit us. A lot better use of a wholesaler's time. I would assume that a wholesaler would use the Jones offices to fill in the day with, not as the primary. Most wholesalers want people that will do a minimum of 500K in flows yearly, a Segment 1 or 2 just won't do that outside of American or Franklin....
 
Dec 14, 2009 11:57 am

Both posts are basically true.  However, you guys are both looking at this through the lens of a newbie (granted there are  a lot of thema t Jones).  Most guys I know out more than 4 or 5 years (including myself) have $100K minimums (several are 250K).  Many are trying to unload their books on Goodknights, not add more small accounts. 


I still believe there is a slow movement away from SMA's.  Check the stats.  SMA's are losing assets industry-wide.  Banks don't really sell them, many indies don't sell them.  They are primarily (not exclusively) a wirehouse tool that is being slowly pushed away in favor of more flexible, nimble approaches.  I think much of this is also a result of the meltdown.  As good times return, you might see more flows back into them.


ETF's will continue to gather steam, and MFD's will probably stay stagnant in terms of overall flows (cyclically adjusted).  Although I do think there will be some industry consolidation.  Too many fund families now competing for space, while ETF's are being created like crazy.  Of course, at some point there will be ETF saturation as well, and the expenses will have to go up due to lower asset bases.  It will be interesting to see what evolves. 
Dec 14, 2009 12:08 pm
B24:

Both posts are basically true.  However, you guys are both looking at this through the lens of a newbie (granted there are  a lot of thema t Jones).  Most guys I know out more than 4 or 5 years (including myself) have $100K minimums (several are 250K).  Many are trying to unload their books on Goodknights, not add more small accounts. 


I still believe there is a slow movement away from SMA's.  Check the stats.  SMA's are losing assets industry-wide.  Banks don't really sell them, many indies don't sell them.  They are primarily (not exclusively) a wirehouse tool that is being slowly pushed away in favor of more flexible, nimble approaches.  I think much of this is also a result of the meltdown.  As good times return, you might see more flows back into them.


ETF's will continue to gather steam, and MFD's will probably stay stagnant in terms of overall flows (cyclically adjusted).  Although I do think there will be some industry consolidation.  Too many fund families now competing for space, while ETF's are being created like crazy.  Of course, at some point there will be ETF saturation as well, and the expenses will have to go up due to lower asset bases.  It will be interesting to see what evolves. 
 
I agree except the basic indexes there will always be a base for that(Ask vanguard, they don't seem to have trouble).
 
I also disagree with you on the Jones idea that offices have minimums, the 10 offices in my area(used to be part of them) will take anything and the make up is....3 newbies( or under 3yrs, including 1 office share) 2 4yrs+, 2 7yrs+, 3 10yr+.... These guys take whoever... kind of sad..
Dec 14, 2009 12:35 pm
Squash1:
...I also disagree with you on the Jones idea that offices have minimums, the 10 offices in my area(used to be part of them) will take anything and the make up is....3 newbies( or under 3yrs, including 1 office share) 2 4yrs+, 2 7yrs+, 3 10yr+.... These guys take whoever... kind of sad..
 
We have this in my region as well; but they amount to a different kind of "churn". The offices are GK factories. Whether or not that makes sense for the office, I have no clue.
Dec 14, 2009 12:56 pm

I hear you.  Many in the Jones system follow the "take anything" philosophy.  I find this to be more common in the wirehouse/regional world versus indy world.  The industry, until very recently, encouraged it.  I don't get it, but it's there.  Well, I do get it.  That's the A-share/commission world.  The old "clients with 5+ products are more likely to stick with you...." encourages this behavior ("Yeah, open that $4000 IRA, then sell them some insurance and give them banking products....").  I honestly can't stand other products (versus investments).  I don't do as much insurance anymore, I refer out my mortgages to others, and I don't like being responsible for the clients credit card, debit card, checking, etc.  I have experienced too many service breakdowns outside my control.  Investments are hard enough without trying to manage everyone else.  One of the many weaknesses of the model (actually some at Jones, and other firms, actually like this approach).  To each their own I guess.

 
There is a contingent of producers in my region that are very competitive with each other.  They formed this little group that gets together to share ideas, be competitive, whatever.  I know one of their focuses is on raising their minimums all the time.  My mentor, for example, has about 300 housholds and $200K average HH.  He is trying to get down to 200 households, and ultimately 150.  He is going to do another GK to get rid of another 75 HH or so. 
 
As far as the "Goodknight" factories, it's no different than the rainmakers that bring in all the clients, then hand them off to service staff or other advisors. 
Dec 14, 2009 1:02 pm

It must be different areas then.. i have a friend at jones who has between $40-50MM and his average household is right about $98K.. Now he has some bigger clients $2MM+, but he has some small ones too..

 
I like the idea of having 75-125 clients with $20-30MM AUM..all fee...not as much stress, no need to prospect heavily.
Dec 14, 2009 1:20 pm
Squash1:

It must be different areas then.. i have a friend at jones who has between $40-50MM and his average household is right about $98K.. Now he has some bigger clients $2MM+, but he has some small ones too..

 
I like the idea of having 75-125 clients with $20-30MM AUM..all fee...not as much stress, no need to prospect heavily.
 
Squash- That is where I am heading to......maximum of 200 households. Nirvana....
Dec 14, 2009 1:23 pm
Squash1:

It must be different areas then.. i have a friend at jones who has between $40-50MM and his average household is right about $98K.. Now he has some bigger clients $2MM+, but he has some small ones too..

 
I like the idea of having 75-125 clients with $20-30MM AUM..all fee...not as much stress, no need to prospect heavily.
 
Yup.  That's my goal.  That's how I prospect.  I think the optimal size would be about 100 with $300K average.  Obviously it would be nice to have fewer, with more assets.  But actually, I find the 300K-750K, age 53-65 range to be the most enjoyable to work with.  The key is just finding enough of them to work with (or that will work with you ).  Usually the $1mm+ clients or the under-age-50 group start to be a little high-maintenance.  And I don't actually like working with seniors (like over 70).  I prefer to start the relationship while they are still working.  Just my style. 
Dec 14, 2009 1:27 pm
Squash1:

It must be different areas then.. i have a friend at jones who has between $40-50MM and his average household is right about $98K.. Now he has some bigger clients $2MM+, but he has some small ones too..

 
I like the idea of having 75-125 clients with $20-30MM AUM..all fee...not as much stress, no need to prospect heavily.
 
The other thing is that people like this, they could usually clip off about 100 clients without even blinking an eye.  Go from 450 to 350 overnight.  Maybe a few million in assets.  Make life much easier.  Could probably clear 200 clients and $5-7mm.  Get down to 250 and still net close to the same amount.  Then start just adding clients over 100K or 200K.  So easy.  No need for so many BOA's.  I know some guys with 85-100mm that need 2.5 BOA's.  With 200 clients or less, you need 1, plus maybe a P/T for overflow/days off, etc.