<SPAN =style9>American Funds Accused of Paying Kickbacks to Brokers (Update1) <SPAN =style5>

Feb. 16 (Bloomberg) -- American Funds Distributors Inc., a unit of Capital Group Cos., paid brokers $100 million in commissions over three years as a reward for past mutual fund sales and to win future business, the NASD said.

http://quote.bloomberg.com/apps/news?pid=10000006&sid=ap q_736HWPpc&refer=home

This could finally end "shelf space" payments, disclosed or otherwise.

Jonestown, read the MOST website. It is a no-load and quotes that we do not pay brokers.

Jonestown: Current career : ClipArtist

Have you ever had your own thoughts?

what is your point Guest 1?  Jones sells the highest commission product that is available to them.  That is the end of the story.

Let’s see if American Funds scraps the revenue sharing program then the other 6 funds will follow suit because we all know Jones is a subsidiary of American Funds.  I can see about $100 million reasons to be concerned.

A couple definitions from Webster:

en·vy
Pronunciation: 'en-vE
Function: noun

Ppainful or resentful awareness of an advantage enjoyed by another joined with a desire to possess the same advantage.

Hostile toward a rival or one believed to enjoy an advantage.

This seems to be the place to “slam” EJ. Here’s one that has REALLY pi**ed me off a few times. Anyone else on this forum had transfer notices to Ed Jones where the instrux. were to “liquidate” the acct. and deliver the “cash”? This seems to be an insidious ploy to somehow skirt an issue on fund switching. How convenient to have “new” money show up where the EJ broker can invest this “new” money in one of the magnificent seven for a (newmoneypreferredfunddiversificationtrip). Not only one EJ broker,but several diff. ones. Must be something they learn to do on their “winning trips”. 

Let's set the record straight. American Funds is cited primarily for directed brokerage. The article insinuates that its largest dealers participated to the tune of 100M. Well folks, do I need to explain who the largest is...EDJ. According to the SEC agreement, EDJ did participate with three fund families.

Separate and distinct is "Revenue Sharing" which  is an industry practice. In my opinion, it needs to be banned by all the regulatory agencies (as directed brokerage is now). It creates an image that every investment rep from any firm steers their clients to funds that payback the reps. Most firms keep all the money. EDJ does share (who knows what percent) with the reps. The IR's slice is very slim. But the effect is in the pyche of the client and prospects (and inquiring IR's) who question our integrity. That's the real damage. Destroying the trust that we work so diligently to build. It's one thing to screw up your own career. It's another thing entirely when you are having to defend the real profiters of the company, the GP's. It's all about greed. Certainly, the individual investor is important...too. Just ask Bill Lockyer.

Well spoken 7yr vet.  Jone has no credibility at this point and they never should have. 

"A "housecleaning," as Cerulli Associates' Dennis Gallant puts it, has already begun.  Cerulli reported a reduction in advisors in 2004 over 2003 at independent broker-dealers, wirehouses, insurance broker-dealers and regionals."

"It represents the first decline since Cerulli began tracking the category five years ago." 

"It's been at least 15 years since the industry has witnessed a fall in advisor numbers."

"For his part, Roame expects "somewhat less" than half of advisors will survive the new environment.  And Sullivan says one need only look to the United Kingdom to get a picture of what lies ahead."

"In 1995, there were 300,000 financial advisors in Great Britain.  Today, according to Sullivan, there are 44,000"

  http://www.researchmag.com/articles/pdf/rb05_cs.pdf

12 predictions for our industry...many already true....

http://www.strategiccoach.com/downloads/prb_12Predictions.pd f

Do they make these in "Settle~Mints"

Jonestown:

Excellent post.  I agree with 11 of those 12 predictions.

If Edward Jones survived ALL of their lawsuits, the changing industry would still ensure their extinction.  Their vacuous platform allows them nothing BUT a commoditized process.

This environment will get challenging enough for those who HAVE the tools, and the ability to create their own unique processes.  How do you survive when you are limited in the processes that the industry already views as commoditized??

[quote=illuminati]

If Edward Jones survived ALL of their lawsuits, the changing industry would still ensure their extinction.  Their vacuous platform allows them nothing BUT a commoditized process.

This environment will get challenging enough for those who HAVE the tools, and the ability to create their own unique processes.  How do you survive when you are limited in the processes that the industry already views as commoditized??

[/quote]

I agree.  The brainwashing that the IRs get and the "follow the recipe and don't question it" mentality that they have, ensures EJ that their IRs will never be able to think outside the box.  That's exactly what the GPs are after.

Those guys don't stand a chance if put into a situation where they have to think strategically.  Besides, most of them don't have the training necessary to do so. 

Weren’t you originally a Jones broker? It would seem to me that therefore your argument is based on flawed logic. Of course, that is thinking outside the box I guess… I love how a person with limited intelligence resorts to generalization, it makes it easier for them.

We are not going to see a ban on revenue sharing. If they did that in our industry it would need to hit every single industry out there that has it. Type in revenue sharing into a search engine. Typically you do not even get to mutual funds until page 2 or more. revenue sharing has existed for decades in most all industries.

 What I would expect to change is how it is allocated to the individual IR. Most firms, read all relevent size firms, revenue share. The difference at Jones is they pay the IR with it. Other firms sweep it into the coffers of the corporation to be used for general purposes. maybe that will be the case at Jones also. With all the revenue sweeping down to the bottom line, it seems fair to all.

Guest1-

I suspect you are correct. The firm should just take all the revenue sharing if it is generated like all the others. So if I understand your logic...if my child comes home and says that she did something wrong and she says that all the kids on the street are doing it, am I going to respond that it is OK because others do it. NO! It is either wrong or right.  Revenue sharing in the fiduciary business, even if properly disclosed, implies partiality, creates a conflict or potential for one. It is only good for the financial companies (GP's). What really bugs me is the double speak that the firm puts forth regarding the sharing of revenue. They share SO much that we can only guess at the actual split. Yet the website claims we share (it doesn't say unequally)which is technically correct but so far from the reality. 

noggin,

Are you bill fakklin's stand-in .... you're almost as funny/intelligent lol on you generalization comment.  Talk about the pot calling the kettle black (when it comes to generalizations)

guest1,

it's not about revune sharing, it never has been! It's been about disclosure and the "apparent" conflict on interest between the fund companies and your employer used when promoting the funds through trips bonuses etc. That's what your employer settled $75 million for with The NASD, The NYSE, The SEC, the US Postal Service (did I leave anyone out?)

Unfortunately, my biggest gripe is, "I'm not a gp, a top producer, or LP".  I hate the way the GP's skirt around the issues of what they've done to the firm...they, in my mind, have ruined one of the best firms in the industry...ruined it...Ted, not that I ever met him, is probably turning in his grave with all of this.  A few greedy sob's..."everyone does it....there will be other firms who this will hit next...we've done nothing wrong...Unfortunately, we the brokers, have to face our clients on a daily basis, sit next to them at church, ballgames..etc...all while the GP's are in St Louis or on some vacation scheming the next money maker..do they make money on the gift catalogs...mailers....You just can't trust them...who wants to work Saturday promo's or Tuesday night promo's,,,,to put more money in the pockets of the GP"s..

[quote=speakeasy]

Unfortunately, my biggest gripe is, "I'm not a gp, a top producer, or LP".  I hate the way the GP's skirt around the issues of what they've done to the firm...they, in my mind, have ruined one of the best firms in the industry...ruined it...Ted, not that I ever met him, is probably turning in his grave with all of this.  A few greedy sob's..."everyone does it....there will be other firms who this will hit next...we've done nothing wrong...Unfortunately, we the brokers, have to face our clients on a daily basis, sit next to them at church, ballgames..etc...all while the GP's are in St Louis or on some vacation scheming the next money maker..do they make money on the gift catalogs...mailers....You just can't trust them...who wants to work Saturday promo's or Tuesday night promo's,,,,to put more money in the pockets of the GP"s..

[/quote]

Can I hear an AMEN????

XEJ, I agree.. It is alla bout disclosure. My post was in response to an earlier one that stated revenue sharing will go away after all this.

7yr, your post is wrong on so many counts, I won't bother. You are a bit disgruntled eh? I asked before, why don't you leave?

Speak, I am an LP and top producer and still work the occasional Saturday. Not for the "greedy GPs" as you out it. I frequently have my best day of the week on Saturdays. I do it for me, not the GPs.

I very well may. Consistent with so many posts that indicate if you ask questions, you must be a malcontent. Questioning is what made this country what it is. Free. I am free to think and feel as I wish. Many of my colleagues at EDJ apparently agree. I guess the question is are you better off somewhere else. The truth is I don’t know. I know the Indy’s of the world will tell me I am crazy for staying. I can’t see myself joining for the dough at the wirehouses. I do thank the GP’s for opening the discussion. I have a guestion for you, Guest 1. You have been around at least 8-10 years, I imagine you have built a pretty nice book to be a top producer. How will you slow down? What equity have you built in your practice? How do you transition or can you? To me that is the real hurdle to overcome going forward.