Why I quit Part II

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Mar 16, 2007 11:25 pm

A Share ONLY business model. The problem with this model is to tiresome to overcome.



First, every financial publication, everything the client ever reads, every friend says don't pay a load. I equate this to trying to sell whole life insurance all day. You can talk someone into it but it takes alot of work and it is arguable if it is even good for them. Second, EDJ says there average holding period is 17 years. How can this statistically be true? GS and Fartford were not even around. In 1990 EDJ had around 2500 brokers. There clients have not been there 17 years! Also, what is good about slamming someone into an A share with 75k and never calling them again? Getting $187.50 a year gross in trails does not motivate me to ever call them. Many times I was forced to take on a client I did not personally care for, however with the upfront kick ($3000), the plan is to take the commission and never call or goofknight them away because you KNOW there is no more money. Hero to Zero 12 times a year got old. For $1125 a year, they deserve quarterly calls a year. Because I KNOW my income I can decide whether to take on a client or not. Under the A share format, you would take the client regaurdless. Just fog a mirror.



Third, Putnam, Federated and any Van den Kamp growth fund. Enough said about indefinate holds.



Fourth, run a hypo 50k A vs C. It takes a minimum five years, usually longer for the A to catch up. Franklin Templeton Growth takes over ten. Don't tell me A's are in the clients best interest. Management changes and cash flows of the fund matter.



Fifth, and underlying reason A shares suck. You are ALWAYS looking for new business. On the many recuiting call I was asked to make, most of my competitors had less under management but made more. I had no time for financial planning, because I was always looking for new money. The number 1 guy in the firm is Troy Nelson in Bismark ND and his gross is less than 2 mil! Compaire that to any other firm. Do you know how much cash you need to bring in every month to have numbers like that? To bring in 67.5 gross a month even at 4.5%. 1.5mil CASH under 250,000, or 7.5 200,000 accounts a month or almost two a week! A share provide no leverage for your business.(assumes the rest in trails) Look out another ten years. Do I still want to be trying to sell A share to the same neighborhood?



I am not alone on this. Remember your precious Am Funds switched from only A's to six or more classes in the 2000's. Probably a good reason for the assest explosion.



To be truly successful you need 100 million at EDJ. Look at the percentage of FA's that have that. Read Nick Murray. Get 30 mil at 1.5% and and you are a $450,000 producer, every year. I decied who gets on the boat, not the need to make a segment.



I will never forget my first fee based presentation. for an inherited 100,000 in a retail account. You can either pay me $4500 today,( two 50k breakpoints ) or $1500 a year. If it grows I get paid more and if it shrinks I get paid less. You can walk away any time. Easy choice for the client, and I did just that, gave them the choice. Plus he already had 40k in ira mf with me. The irony is that they are paying the 1.5% internally on the mutual fund as well.



I will save you time and give you the EDJ answers:



1. It is in the best interest of the client.

     How is having 100% of my money in one or two fund family's in the clients best interest. (much less my book) No one fund family is that good. See reason three above. As far as Am Funds go, does it not bother you that the funds alone, not asset management ect is literally 10 times bigger that Berkshire Hathaway.



2. Your not smart enough to asset allocate. 10 years ago (insert name) left EDJ and tried that and lost all his clients money.

     This is the utimate scare job, to put doubt in you mind about the other side. DON'T LOOK AT THE MAN BEHIND THE CURTAIN!!!!!   

Mar 17, 2007 12:01 am

I have an idea...hold out both of your hands. Fill one up with all the people who care why you quit EDJ and the other with pooh-pooh. Which one filled up faster?

Mar 17, 2007 1:45 am

Stl Sucks you are right on brother.   If American Fds ever blows up i.e. Putnam, EDJ is done (so are alot of other firms).


After Putnam, I will never make the 25 million dollar mistake again.

Mar 17, 2007 4:05 am

Amen brother.  I've read a lot of posts.   Yours is one of the best.  Preach on brother, preach on.  I feel your pain.  Believe me, I feel your pain. 


 My feet hurt


 ED

Mar 17, 2007 8:06 am

Here's the bottom line with "A" shares.  For a buy and hold investor, this is the cheapest share class.  The problem is that an advisor has to choose between servicing the account or making money because paying attention to "A" share clients hurts the rep's income.    Therefore "A" share ulimately means "no service" or at least, inadequate service.


"Cheapest" for the cient does not equate to "best" for the client.

Mar 19, 2007 10:17 am

Anonymous-


Show me a statistic that says the average investor holds their mutual funds longer than 2 years. That's what wrong with the Jones montra. Of course they say that their clients hold on 10-15 years.


My question...Is the Jones client different than the average stat? The most profitable investment for Jones is A shares. There revenues are tied so closely with funds and AF, that the chances of them ever changing seems to me to be remote even with the current visionary at the helm. Otherwise they would have already embraced C shares or a wrap program (Jones is brilliant at selling future enhancements) where you can pick the best and get rid of all the crap which STL illustrated so well above.


The comment about AF going south at some point brings shivers and concern. It hasn't happened yet, but I know after the Putnam fiasco, that I can never say never. And with a book linked to AF (as a former Joneser), I think I am doing the prudent thing by diversifying OUT of AF and into other sectors that they don't excel at. Just in case.


Mar 19, 2007 10:56 am

First, I'd venture to guess you don't even know how Troy gets to that mark every year.  It's not putting people in A shares one $50k breakpoint at a time.  It's insurance (Life and LTC), trails, $50 million in MAP, and a lot of other avenues.  If you're only looking at bringing in new dollars then yes, it's really difficult to hit those numbers.


Second, I'm not going to completely disagree with you about A shares.  They are not right for all people all the time.  Neither are C shares, or fee based, or no load, or whatever.  My philosphy with A shares is that the client gets to decide what way they invest.  Some like A shares, some like B shares, some C, some like fee based.  At the end of the day they get to pick how they want to pay you to do the business.


The arguement about not calling your clients because they don't pay you enough every year is bogus.  When you landed all those clients you probably promised them that you'd call them at least every quarter, 6 months, whatever.  The fact that you can't keep your promise has very little to do with the money you get paid and a lot more to do with your character.  The guy with $50K probably doesn't want you to call him all the time.  But you have to ask him how often he wants to be contacted and then do it.  Yes, the prospect with new $$ to bring in gets more attention right now than the guy who rolled over his small 401K last year.  I'm going to bet that a couple of years from now when you are used to your new "better" platform, you'll make up some other excuses as to not call your smaller clients.  Probably some rationale like well, I only call those clients who pay me $eleventy kabillion annually.  Everyone else gets a letter. 


Finally, your hypo system is broken.  It does take some time for the Templeton Growth A share to catch up with the C share, but not 10 years.  Actually about 5.  You may want to have that checked.  Hmm...I wonder who you're going to call to have them look into that?         & nbsp;   

Mar 19, 2007 12:46 pm

Spaceman,


Let's not forget that the Jones payout percentage for C-shares and (I think B-shares) is a lower than A-shares, so Jones is using a velvet hammer to further push you into the direction of A-shares.  No matter what you say, the above policy creates an environment where A-shares are recommended more than any other share class regardless of whether it's good for a client or not.  Please don't try to tell me that it has no impact.

Mar 19, 2007 1:11 pm

If I wasn't so busy today I jump in here and level Spiffy.  Maybe this evening or tomorrow...keep it up UWECEE6

Mar 19, 2007 1:56 pm

I agree.  Jones has an A share bias.  No big secret there.  I don't think anyone is going to argue that.  Whether for the benefit of the GPs or the clients is up for speculation.  My personal opinon is that STL Sucks is looking for the fastest buck out there.  And an A share biz that is good for the client long term doesn't fit the bill.  He's going to start his own biz and wrap everyone at 1.5%.  He's going to manage $30 mil and be happy.  Good for him.  I love to meet clients of brokers like that.  Because the same arguement he has, ie you can pay me $4500 now or $1500 a year, works well in the reverse.  How much service do you get for the 1.5% you're paying your broker?  Did you know that even when your portfolio goes down by 20%, he still gets paid his 1.5%?  How does that make you feel?   Some people believe that they're broker is working harder for them because they are paying them constantly.  Bull.  A lazy broker is a lazy broker.  We've all seen it. 


The A shares suck arguement is a crutch to support a failing broker.  If you read Nick Murray and can bring in assets like he can I would think you'd prefer A shares. 


I can't wait for Jones to launch some sort of wrap account besides MAP.  It will give clients one more option.  They can make an informed decision about how they want to pay me. 

Mar 19, 2007 3:05 pm

Spiff, I sell A's and Fee base.  Let me ask you this....Put in the order of rank 1 being most important 3 least to the GP's:  a)Company Profits   b)Clients  c)IR's


Before you answer I believe you have the clients interest at heart. I really do.


My anwswer would be 1=A 2= C  3= B


The reason I am asking is the Gp's see the squeeze of 12b1's and other revenue sources from funds coming. They are going to offer per Weddle some type of fee base using etf's.  Why do you think?  So you can create a revenue source without the Funds having you by the balls.


Mar 19, 2007 3:22 pm

Space-


Wouldn't it be nice to have the best of ALL worlds to offer to your clients. AF is the premier fund family, no question. But what if you could take the best of AF and compliment them with others. You wouldn't be burdened with the up front load but rather the essence of picking and keeping only the best. Isn't that better for most clients?


And you would be required to rebate the 12b-1 lessening the bite that the client would pay for truly objective advice. In your situation and my prior life at Jones, this isn't an option. Wouldn't your clients be in the best possible situation then?You are very strident in how you always are doing whats best for the clients, but aren't the GP's forcing you to offer A shares so they can get their split of the 12b-1. Or worse yet the backdoor arrangements that you probably don't participate in. Haven't you had a wholesaler say that Jones is a pay for play house?


Space, I am sorry to be the one who has to break you the news. YOU ARE NOT AN OBJECTIVE ADVISOR IF YOU OR YOUR COMPANY ACCEPT KICKBACKS. You have an axe to grind. Sooner or later you will face the music.


The post above says it all....GP's, clients and FA's. True colors shine through!

Mar 19, 2007 5:12 pm

Hey! Moderator!


Maybe the intent of my Coke-Pepsi-rootbeer post went past you!


The interminable blather of Jonesers v The World has again come down to the perception that there is a choice between two alternatives. 'A' shares, not 'A' shares  back and forth again and again each time both sides are more strident in their insistance.


There is a whole world of different things to talk about within the investment community, just as there are so many other flavors of soda pop. Why must we be subjected to the same STOOPIDITY again and again and again and again?


You want to edit something? Why don't you edit the space alloted to Edward D Jones warring? Make a forum folder for just Jones junk and delete any thread that becomes a jones forum outside of that forum folder!

Mar 19, 2007 5:40 pm

Go to hail

Mar 19, 2007 6:05 pm

Whomit,


  If you don't like this sick entertainment - don't read it. And why are there so many posts during working hours. Don't you guys have calls to make and people to see and doors to knock on.

Mar 19, 2007 6:20 pm

Actually Drapala, I have spiffy on speaker phone and we're discussing the Tuesday Night Promo.  I've got my call list and he is helping me with what I can turn over in their accts.  MONEY IN MOTION BABY!!!!  I think I seen Weedle wearing a t-shirt with that on it. 

Mar 19, 2007 6:27 pm
Spaceman Spiff:

I agree.  Jones has an A share bias.  No big secret there.  I don't think anyone is going to argue that.  Whether for the benefit of the GPs or the clients is up for speculation.
[QUOTE]

You really think it is matter for speculation?  The A-share model works because it generates fast cash flow and isn't too sensitive to the brokers ability to service clients.

[quote] My personal opinon is that STL Sucks is looking for the fastest buck out there.  And an A share biz that is good for the client long term doesn't fit the bill.  He's going to start his own biz and wrap everyone at 1.5%.  He's going to manage $30 mil and be happy.  Good for him.  I love to meet clients of brokers like that.  Because the same arguement he has, ie you can pay me $4500 now or $1500 a year, works well in the reverse.  How much service do you get for the 1.5% you're paying your broker? [/quote]

How much service does the client get for their 0.25bp trail? I explain to people that this is why your broker only calls you with something to sell. A new bond, a mutual fund etc. It's all about revenue activities.

Spiff, I the A-share model has holes big enough to push a truck or at least an ACAT form through.

[quote]Did you know that even when your portfolio goes down by 20%, he still gets paid his 1.5%? How does that make you feel?   Some people believe that they're broker is working harder for them because they are paying them constantly.  Bull.  A lazy broker is a lazy broker.  We've all seen it.  [/quote]

How do you feel knowing that, after he makes the sale, your broker doesn't care about your investments?

He's made his commision and is off hunting big game elsewhere. If your investments tank 20% it affects me personally, it doesn't affect your broker since he's made his sale.

Cmon Spiff, this is a knife that works both ways, except the serrated edge is sharper my way.

[quote]The A shares suck arguement is a crutch to support a failing broker.  If you read Nick Murray and can bring in assets like he can I would think you'd prefer A shares. [/quote]

No, in that case I would be selling EIA's and pulling down 6% and trails.

I don't think of myself as a salesman, but instead as a consulting professional. I want to be paid for services, not sales. I want to cultivate my garden, and not be whacking bushes.

[QUOTE]I can't wait for Jones to launch some sort of wrap account besides MAP.  It will give clients one more option.  They can make an informed decision about how they want to pay me.

Jones is going to swich course on fee based so fast it will make your head spin. The downside is that attrition will be even worse, as why should you charge 1.25 and get 40bp when I can do 1.00% and get 90bp.

Also, clients are going to expect a much higher standard of case in a fee based platform. Just having a palette of 8 crayola water colors won't wash.


Mar 19, 2007 6:30 pm

bspears,


 How do you work your speaker phone? I can't get mine to work. The Tuesday Night Promo should be good - we have some really nice 20 year bonds. How did Tweedle already get a t-shirt?

Mar 19, 2007 6:56 pm
Whomitmayconcer:

Hey! Moderator!


Maybe the intent of my Coke-Pepsi-rootbeer post went past you!


The interminable blather of Jonesers v The World has again come down to the perception that there is a choice between two alternatives. 'A' shares, not 'A' shares  back and forth again and again each time both sides are more strident in their insistance.


There is a whole world of different things to talk about within the investment community, just as there are so many other flavors of soda pop. Why must we be subjected to the same STOOPIDITY again and again and again and again?


You want to edit something? Why don't you edit the space alloted to Edward D Jones warring? Make a forum folder for just Jones junk and delete any thread that becomes a jones forum outside of that forum folder!




I understand the frustration about too much Jones.  However, fact is, they train the most people and will have the most on this board.  I can't imagine why it is so hard for you to simply not read the threads about Jones as they are easy to avoid in most cases.

Mar 19, 2007 7:19 pm

Gad12,


I can't possibly care less how many people Jones "trains".


I made a relevant point and the moderator chose to excise it.


This pusillanimous pabulum puking piker of a moderator ought to do something to cut down on the worthless theads (like, Why I Left Jones) that only invite the same inane rhetoric.