So long, mr weddle

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Nov 3, 2007 8:58 am

weddle announced on Wednesday that the new advisory platform will be for the 2008 Summer Regionals. BAD NEW FOR US: it will only have "limited" ability to stray from model portfolios, and will include funds and "maybe some ETFs".  So the idea of picking the best out of the whole fund/ETF universe is gone. I am gone. 'Bye Jim!

Nov 3, 2007 2:18 pm

was that on uptick or something?

Nov 3, 2007 3:24 pm

Q & A on his channel 1 broadcast---see replays

Nov 3, 2007 6:16 pm

newnew - so you have the time and the knowledge to pick the funds that will work in the future! You also have the time and the knowledge to maintain the allocation, know when to move funds to take advantage of sector rotations. You also have your CFA or at minimum your CIMA. I'm impressed that you're that good & that educated.



The purpose of managed money is to take us out of the investment equation & turn that over that job to CFA & CIMA's because they have more experience, knowledge & the time to do it right. This allows us to spend the time managing client's lives - you know, the thing they actually pay us for.

Nov 3, 2007 8:03 pm

I agree with you, but I want more flexibility. I want to be able to do what i do now, which is to use model ports OR NOT depending on a particular case. What if I want to ACAT in an account, and the new client wants to stay in a wrap? It will have to be the ol' "liquidate and transfer" no matter what. Is that right, esp in a non-qualified account?


Lets face it- model ports allows Jones to make sure we all use the revenue sharing fund families.
 
Nov 3, 2007 8:42 pm

Newnew-


Did Weddle say anything about rev sharing and wrap accts? Is that policy going to continue (tongue in cheek!)?
 
 
Nov 3, 2007 10:52 pm
newnew:

I agree with you, but I want more flexibility. I want to be able to do what i do now, which is to use model ports OR NOT depending on a particular case. What if I want to ACAT in an account, and the new client wants to stay in a wrap? It will have to be the ol' "liquidate and transfer" no matter what. Is that right, esp in a non-qualified account?

Lets face it- model ports allows Jones to make sure we all use the revenue sharing fund families.





Certainly flexibility is not Jones' strong suit. However, I'm approaching 50 acct's in wrap & I have only one acct that I've done that with, and I'm regretting it!

Nov 3, 2007 11:22 pm

So, newnew...what's your plan?

Nov 4, 2007 1:12 am

So I guess I was right...I said 2008 they would announce the fee based platforms.  The FA would have no control over pricing.  The FA would have no control over choices.  The FA would be slave to the KoolAid.  They will not allow you to take any of the money you have in funds currently and move them into the new program.  it has to be all new money.  And lastly, Jones' fee based platform will be holier than thou better than everyone elses.

 
What are you boys at Jones going to argue about now...That the wrap program at our firm is better than the wrap program at your firm.  You guys are the best salespeople in the world.
 
 
Nov 4, 2007 5:05 am

and once again jones sucks.................

Nov 4, 2007 6:42 am

good comments, except the "jones sucks" is not exactly the kind of comment that keeps a good conversation flowing.

 
I am looking at options. Have an indy RIA friend who wants me to join him in some way. Perhaps share expenses, but have two indy books. Gotta admit his points on "no commission/no FINRA" are intriguing. No hurry though. Gotta make a good decision-- wirehouse also interested in me.  
Nov 4, 2007 8:20 am

The only thing about the RIA route that gives me pause, is what do you do with the clients who are absolutely against fee-based arrangements? My #2 & #3 clients are commission-based and no way would I want to give them up. I guess there's nothing to prevent you from using a different platform and still sharing expenses. In fact someone suggested in the recent past that you can run both an RIA platform (outside of a B/D) while running a commission-based platform under a B/D.



The biggest concern I would have with going to a wirehouse is what happens when you decide that you don't like working for them any better than you liked working for Jones? That may not happen, but you can be more certain that you'll get along with the boss if the boss is you.



You're wise to take your time and plan your departure carefully. Whatever you decide, good luck and keep us posted...

Nov 4, 2007 9:20 am
spikedkoolaid:

So I guess I was right...I said 2008 they would announce the fee based platforms. The FA would have no control over pricing. The FA would have no control over choices. The FA would be slave to the KoolAid. They will not allow you to take any of the money you have in funds currently and move them into the new program. it has to be all new money. And lastly, Jones' fee based platform will be holier than thou better than everyone elses.



What are you boys at Jones going to argue about now...That the wrap program at our firm is better than the wrap program at your firm. You guys are the best salespeople in the world.







Wow - that sucks.

Nov 4, 2007 12:44 pm

At a meeting about a month ago a GP told us that the fee based platform will be:
Offered mid-2008
Will have home office portfolios as well as FA flexibility
Will offer Preferred funds, no-load funds and other load funds besides the preferred.
ETFs and stocks MAY be introduced later.
Auto Rebalancing
"Mature" A share accounts will have procedures to move to fee based, newer A shares will not.
$100,000 minimum
Pricing not yet released

That is all I remember but I feel like a missed something

Nov 4, 2007 10:33 pm

so at least initially, all clients in the program are stuck with the tax inefficiency of mutual funds. although it sounds like passive no-loads may be included for that, which is good.

 
Weddles verbal commenta did not seem to indicate much "A flexibility".
 
Indyone: my RIA friend also has a B/D for no load annuities, he said, since I do some insurance too. Not sure how it would come together, but I am very concerned that if I go wirehouse I'll end up indy eventually anyway--so why bother? I'm not that "corporate".
Nov 5, 2007 5:12 pm
Maxstud:

At a meeting about a month ago a GP told us that the fee based platform will be:
Offered mid-2008
Will have home office portfolios as well as FA flexibility
Will offer Preferred funds, no-load funds and other load funds besides the preferred.
ETFs and stocks MAY be introduced later.
Auto Rebalancing
"Mature" A share accounts will have procedures to move to fee based, newer A shares will not.
$100,000 minimum
Pricing not yet released

That is all I remember but I feel like a missed something

 
Since I am not familiar with exactly how other firm's advisory accounts or wrap accounts work, could someone compare/contrast what is listed above?  To me it does not sound too bad, other than the fact that I would like to have stocks and individ bonds included.  I am not concerned about the account minimum - I can't imagine putting something smaller than that in a fee account.  C shares get the job done for that.  Although it would be nice to move A-share accounts in there, it wouldn't seem fair to the client if they recently paid a load.   I am guessing its 75 bipswith a 40% payout (it better not be reduced ).
My number 1 concern is that I be able to use certain fund families that are hard to incorporate right now due to breakpoints (i.e. Loomis Sayles Strat Income).  I sometimes will do a-shares for the core plus a c-share for the random fund, but it's sometimes too difficult to explain to client, therefore not worth the aggrevation.
 
Until we see the ACTUAL model, it's hard to speculate.
Nov 5, 2007 6:42 pm

I just reviewed a proposal from Morgan Keegan for some prospects.  It sounds identical to what Jones is proposing.  They called it the "Preferred Funds Non-Discretionary Program".  I had to wonder if they got in trouble for revenue sharing too. 

 
I've got another prospect that works with the Mutual Fund Store.  Same setup. 
 
Buddy that works at BAC.  Their wrap acct is also the same. 
 
I've seen many other programs that look a lot like what Jones is going to send us.  I'd like the ability to do stocks and bonds too, but not enough to get upset about at this point.  Let's see if they can run it properly first.  Then they can add the bells and whistles.  I don't ever see Jones giving us full discretionary trading accounts like you see at the big wires.  Too much compliance and too much litigation risk. 
 
That newnew has decided to leave based on this speculation is funny.  Tells me there are other problems/issues and this one is just a trigger.  
Nov 5, 2007 7:02 pm

Broker24 - it's pretty competitive with other places. I've seen 3 bank brokerage environments.



I might ask -



- What really is the total universe of funds to pick from?

- Who's behind the portfolios? Personally I'd be concerned if Jones was handling the allocations, but you may not be. The reason I'd be concerned is that you don't have deniability. "Let's fire Edward Jones here. They are significantly underperforming..." Where do you go from there? Also, if it's Jones managing the portfolios then Jones has to do the due diligence on each fund in the universe. This means there will be a much higher weighting in the preferred funds, and likely a smaller universe.

- Will it be custodied at Jones & therefore be able to use institutional shares or at Fidelity or elsewhere & then have to use shares w/ 12b-1's(custodians are often compensated by the 12b'1's). I doubt this will be a problem.

- The account minimum is about right. I have only 2 acct's that are under $100K & I'm kicking myself for both of them.

- The industry pays a premium payout for wrap acct's - usually 5% greater than the grid. Firms are looking for a more sustainable business model than burning out their best commission-driven reps also & they want the recurring & somewhat stable revenue stream.

- 75 bps is too small to do these types of acct's in my mind because there's a much higher level of liability to these acct's. Putting on my principal's hat - determining suitability is required at the time of the sale of a mutual fund. In a wrap account because the disclosed fee is for advice, determining the suitability of the investment is required on an ongoing basis. Essentially, you can't walk away from these accounts. I require at least 100 bps - 120 bps depending on the type of services I am offering to clients.

- Client costs are competitive if the cost to the client is between 1.3% - 1.5% for the mutual fund wrap program + portfolio management fees.

- Firms often have portfolios for people who are accumulating & different portfolios for those in the distribution phase. Tax efficient portfolios are available within each allocation. Also, many firms are going to Index Plus portfolios where they buy ETF's for asset classes they don't believe they can outperform with a mutual fund. This dramatically lowers fees & allows the Bogleheads to have their day. Finally, unified managed acccounts(separately managed accts, ETF's & funds) and SMA programs are often available for high net worth individuals. I'm sure that Jones will eventually have something to fill each box.



Hope it helps!

Nov 5, 2007 8:00 pm

yeah, just a trigger. might've stayed had this happened already, but I agree they will underprice it--that is what I have heard (75 bps or so gross). Maxstud got the scoop?

Nov 6, 2007 12:58 am

People are you really listening to yourselves:

 
No Control of Pricing
No Control of Funds
No Control of Fixed Income:  I can see it already:  "Mr. Customer let's liquidate and transfer that money from XYZ Brokerage firm and move it into our fee-based platform charging .75.  It will save you XXX dollars.   And then we are going to buy 3 of these individual 30 year bonds out of our inventory paying me 2.5 Net and since you don't need the interest we will dollar cost average the interest payments into this great 5-Pack of Stocks.
They will call it diversification.
Until Jones sees the loop holes in the pricing models they will continue to promote advisors liquidate and transfer their accounts to Jones.  The law of unintended consequences. 
 
I can't imagine the struggling Segment 2 Broker getting a $250k rollover and getting paid 40% on .75.  They will figure out the math very quickly.  $875 on a yearly basis.  I just can't see it.
 
Spin it how you want...The true advisory business is taking the clients needs and assessing their goals and then allocating the portfolio accordingly.  Not just Liquidate and Transfer!