Wholesalers

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Sep 16, 2009 2:24 pm

Heard today that American Funds is seriously thinking about eliminating wholesalers. They feel they don't need them anymore and that they have built the brand up enough(i.e. Vanguard, Fidelity)

Sep 16, 2009 2:29 pm

I think American Funds should just eliminate their funds all together instead.

Sep 16, 2009 2:50 pm

Well Vanguard and Fidelity both accept direct individual accounts.  Perhaps American Funds will go in that direction.....and be in direct competition with FAs.

Sep 16, 2009 2:57 pm

That would not surprise me.  I don't feel that the wholesalers add much value, other than to newbies (for education).  Personally, I think it would be a mistake if American Funds went direct to the consumer.  Half the FA's out there would stop using them.  But I think they see the writing on the wall within the industry, and see that Jones, the last bastion of "A share slingers" is abandoning ship, and now every fund must fight on their own merits, not on revenue sharing, or wholesalers, or whatever.

Sep 16, 2009 3:05 pm
B24:

That would not surprise me.  I don't feel that the wholesalers add much value, other than to newbies (for education).  Personally, I think it would be a mistake if American Funds went direct to the consumer.  Half the FA's out there would stop using them.  But I think they see the writing on the wall within the industry, and see that Jones, the last bastion of "A share slingers" is abandoning ship, and now every fund must fight on their own merits, not on revenue sharing, or wholesalers, or whatever.

 
Jones still has revenue sharing and still does A share business. I am confused by what you mean about them abandoning ship. Any fund should always be on it's own merits......
Sep 16, 2009 3:14 pm
B24:

That would not surprise me. I don't feel that the wholesalers add much value, other than to newbies (for education). Personally, I think it would be a mistake if American Funds went direct to the consumer. Half the FA's out there would stop using them. But I think they see the writing on the wall within the industry, and see that Jones, the last bastion of "A share slingers" is abandoning ship, and now every fund must fight on their own merits, not on revenue sharing, or wholesalers, or whatever.





I think it would be intelligent if American Funds pulled a vanguard or fidelity. They wouldn't care if the FA's stopped using them because they would pick up the assets from individuals instead. Plus how kind of hard to go back on 10 years of preaching american.



I don't think Jones is abandoning ship. I also think advisors who use funds will never buy or sell based on merits. I have a friend who will only buy funds where he doesn't have a ticket, so no noload funds, or any other fund company that isn't on his approved list.



Wholesalers are useless to anyone who has been in the business longer than 3 years.

Sep 16, 2009 4:07 pm

I don't think it would be difficult at all for Jones advisors to stop using American Funds.  I haven't looked to them first in a few years.  And with Advisory Solutions I'm looking to them less and less. 

 
I think what B24 is saying is that in years past you'd never hear anything but positive feedback about American Funds from Jones.  They just recently sent out a notice that they were yanking Bond Fund out of Advisory because American was switching the portofolio composition more towards govy's than corporates and it didn't fit the style they were looking for any longer.  Couple that with the recent wholesaler changes or historic underperformance and arrogance of their past wholesalers and the crown starts to look a little tarnished.  There are still some die hard American Funds sellers in our region, but they're becoming fewer and fewer every day.  Mostly because they're leaving to go to LPL, but that's another thread. 
Sep 16, 2009 4:56 pm
noggin:
B24:

That would not surprise me.  I don't feel that the wholesalers add much value, other than to newbies (for education).  Personally, I think it would be a mistake if American Funds went direct to the consumer.  Half the FA's out there would stop using them.  But I think they see the writing on the wall within the industry, and see that Jones, the last bastion of "A share slingers" is abandoning ship, and now every fund must fight on their own merits, not on revenue sharing, or wholesalers, or whatever.

 
Jones still has revenue sharing and still does A share business. I am confused by what you mean about them abandoning ship. Any fund should always be on it's own merits......
 
Jones is not abandoning American Funds completely (nor revenue sharing), but (and if you were still here you would understand the undertone) there is definitely a different tone within the firm.  Almost nothing is sacred anymore (which is good).  I think Jones is prepping themselves for the time when revenue sharing or "shelf space" agreements get legislated away in some form or another. 
 
My point about "merits" is that not just at Jones, but the entire industry has conflicts with the mutual fund industry.  Almost all the wirehouses have/had ownership of various mutual fund companies.  Just look at wirehouse statements and you can see where there are conflicts.  They all (including indies) have revenue sharing agreements.
 
I think the time will come where there will be absolutely NO reason for a firm or an FA to recommend, suggest, or follow one fund over another, other than based on it's merits.  That simply doesn't exist today.
Sep 16, 2009 5:05 pm
B24:
noggin:
B24:

That would not surprise me. I don't feel that the wholesalers add much value, other than to newbies (for education). Personally, I think it would be a mistake if American Funds went direct to the consumer. Half the FA's out there would stop using them. But I think they see the writing on the wall within the industry, and see that Jones, the last bastion of "A share slingers" is abandoning ship, and now every fund must fight on their own merits, not on revenue sharing, or wholesalers, or whatever.



Jones still has revenue sharing and still does A share business. I am confused by what you mean about them abandoning ship. Any fund should always be on it's own merits......


Jones is not abandoning American Funds completely (nor revenue sharing), but (and if you were still here you would understand the undertone) there is definitely a different tone within the firm. Almost nothing is sacred anymore (which is good). I think Jones is prepping themselves for the time when revenue sharing or "shelf space" agreements get legislated away in some form or another.



My point about "merits" is that not just at Jones, but the entire industry has conflicts with the mutual fund industry. Almost all the wirehouses have/had ownership of various mutual fund companies. Just look at wirehouse statements and you can see where there are conflicts. They all (including indies) have revenue sharing agreements.



I think the time will come where there will be absolutely NO reason for a firm or an FA to recommend, suggest, or follow one fund over another, other than based on it's merits. That simply doesn't exist today.





I don't have a revenue sharing agreement. Any way I can get in on that?

Sep 17, 2009 9:46 am

they started eliminating them about 2 months ago. ours (he was only ours in that he covered the territory, he never actually stepped foot in the office) was a 10+ year vet, easily bringing in $1mil a year net to himself - gone along with many of his colleagues.

Sep 17, 2009 12:16 pm

Hi, I'm your new internal wholesaler (fill in the blank).  I help your external wholesaler (fill in the blank).  I'm calling today to learn about your business and how I can help.

Me: I've never met (fill in the blank)
Jr: Well he's only been on the territory for __ years, he took over for (fill in the blank).
Me: I never met him either.
Jr: Well we recently restructured our coverage.  But tell me about what kind of businness you do. blah, blah, blah
 
 
Sep 17, 2009 12:27 pm

Our AF external just got canned.  Met him once in 10 years.  Never even heard of him hosting a seminar, dinner, or any kind of event for either a client or advisors.  $700K gig down the drain just like that!

Sep 17, 2009 12:29 pm
Valhalla:

they started eliminating them about 2 months ago. ours (he was only ours in that he covered the territory, he never actually stepped foot in the office) was a 10+ year vet, easily bringing in $1mil a year net to himself - gone along with many of his colleagues.

 
That really sucks for them.  It's probably pretty tough to find another job, and if you do, you're definitely taking a huge pay cut.  I'll bet a lot of them have to sell their homes now.
 
I can only imagine that they would walk around saying they are American Funds wholesalers and sit on top of the world.  The funny thing is, they are (were) like big foot, the lochness monster and aliens...people say they exist, but I've never seen one in person! 
Sep 17, 2009 12:42 pm

I must be in the minority....had lunch with mine yesterday.  He hosted a client appreciation event for me some months ago.  He totes the AF company provided sales-pitch-of-the-quarter, but he's also good in front of a crowd.  I'd hate to see him go.

 
Now his predecessor, that's a different story.  What was his name????  I saw him once.....
Sep 17, 2009 1:17 pm

Seems to me like these guys can transition easily to other things - like being a whole saler for a money manager or another fund company.  If you are an established vet, then all that really matters is your contacts?


Or am I totally off base?
Sep 17, 2009 1:42 pm
Wet_Blanket:

Seems to me like these guys can transition easily to other things - like being a whole saler for a money manager or another fund company.  If you are an established vet, then all that really matters is your contacts?


Or am I totally off base?
 
I think you're off base.
 
Think how widely used, unfortunately, American Funds is.  The majority of the advisors using them don't know who the wholesaler is.  All the American Funds in 401k's aren't going to be moved to different funds.
 
Sure, he may get some other business from some of the reps he knows, but he won't be making half or even a quarter of what he did, in my opinion.
Sep 17, 2009 2:17 pm

I disagree.  A few years ago our American Funds guy went to a MFD competitor.  The majority of my business followed him to the new firm.  Unbelieveably good wholesaler.  The guy who replaced him I have seen twice in five years.  Not so good.

Sep 17, 2009 7:40 pm

Our American funds guy is bright, personable, a superb presenter and seen as often as Santa Claus. Once a year.
He comes into the office, orders a sandwich spread and walks through with the current story handed down to him from corporate.
I truly doubt that his interaction with us makes any material impact on the $ inflow into his funds in his territory.  Have you done American funds business because your wholesaler sold you on it, other than in your first year?
The guy probably makes 500k at least, and probably closer to a $1MM. I think he adds little to no value because either you have a hard on for American Funds or you don't.