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Jun 26, 2008 9:38 pm

I think it has more to do with HQ’s relationship($$) with American than it does about the client.  HQ knows where its bread is buttered and its about the kickbacks.  Just think of all the resources waisted on a 10k trade…must have been a slow day in the compliance bull pen.  “HEY JOHN, WE GOT A LIVE ONE.  MOVEMENT OUT OF AMERICAN FUNDS, TIME TO KICK SOME IR ASS.”  CODE RED…CODE RED…

Jun 26, 2008 10:14 pm

My guess is it went more like this:  FA places trade to move AIVSX to TEBIX.  That trade triggers a system generated wire with questions about why the trade was done, how long the client held the fund, what fee was paid, and if he had the client sign a switch letter.  In his response he puts that the client has held AIVSX for 10 years.  He paid 5.75% on the original purchase.  No switch letter was signed.  Making switch because AIVSX is simply a closet index fund with a load and no longer matches my management style. 

  FSD reads the response, has a question, calls FA to get answer.  FA gets defensive because a lowly FSD is questioning his judgement.  They argue for an hour about the trade because FA really can't give a rational explanation other than the closet index fund one and FSD doesn't believe that is an acceptable reason to liquidate fund and pay another sales charge.  Both believe they are looking out for the best interest of the client, just disagree on the mechanics.    I got a wire today from my FSD on a switch out of AMCPX for ITHAX.  I answered it with something that didn't contain any attitude, got a switch letter signed from my client, and spent 10 minutes on the whole thing.  I guarantee it wasn't the trade, but Magician's attitude that cost him an hour on the phone. 
Jun 27, 2008 12:08 am
iceco1d:

Not to veer off this enlightening topic…but doesn’t American “kickback” the smallest AUM % of all of EDJ’s revenue sharing funds? And $0 up front for new sales?



You're correct. It's the smallest by far. And they are barely a player in the new advisory platform. And Jones refunds any revenue sharing income from that platform back to the client's account.
Jun 27, 2008 12:11 am

[quote=Spaceman Spiff] My guess is it went more like this: FA places trade to move AIVSX to TEBIX. That trade triggers a system generated wire with questions about why the trade was done, how long the client held the fund, what fee was paid, and if he had the client sign a switch letter. In his response he puts that the client has held AIVSX for 10 years. He paid 5.75% on the original purchase. No switch letter was signed. Making switch because AIVSX is simply a closet index fund with a load and no longer matches my management style.



FSD reads the response, has a question, calls FA to get answer. FA gets defensive because a lowly FSD is questioning his judgement. They argue for an hour about the trade because FA really can’t give a rational explanation other than the closet index fund one and FSD doesn’t believe that is an acceptable reason to liquidate fund and pay another sales charge. Both believe they are looking out for the best interest of the client, just disagree on the mechanics.



I got a wire today from my FSD on a switch out of AMCPX for ITHAX. I answered it with something that didn’t contain any attitude, got a switch letter signed from my client, and spent 10 minutes on the whole thing. I guarantee it wasn’t the trade, but Magician’s attitude that cost him an hour on the phone. [/quote]



Spiff, sometimes you go off the deep end defending Jones. But if I were to guess, based on my experience also, your post is EXACTLY how the entire conversation probably went. To a “T”. As long as I have given a reasonable explanation, and gotton a switch letter if needed, I have never had a trade overturned, or even debated (and that is regardless of the fund families involved, since it is all pretty much system generated “trip-wires”).
Jun 27, 2008 2:32 am

In my region when a company got kicked off the preferred list, i.e. Federated and Putnam, Ir’s would make a “call list” and it was well known that as long as they switched into American everything would be lovely. Switching out of American would get a beatdown…

Jun 27, 2008 12:06 pm

Hmm, it sounds like every time I come across EDJ account I should ask the person, “Let me guess, you are invested in American Funds, right?”

  Also, isn't this the weakness of using a straight up brokerage account?  You can't make a trade without generating a commission.  It seems like a wrap account really makes things much easier especially if you don't believe in a blind buy and hold strategy that ignores the medium term realities of the market and the economy.
Jun 27, 2008 1:52 pm

[quote=Spaceman Spiff]My guess is it went more like this:  FA places trade to move AIVSX to TEBIX.  That trade triggers a system generated wire with questions about why the trade was done, how long the client held the fund, what fee was paid, and if he had the client sign a switch letter.  In his response he puts that the client has held AIVSX for 10 years.  He paid 5.75% on the original purchase.  No switch letter was signed.  Making switch because AIVSX is simply a closet index fund with a load and no longer matches my management style. 

  FSD reads the response, has a question, calls FA to get answer.  FA gets defensive because a lowly FSD is questioning his judgement.  They argue for an hour about the trade because FA really can't give a rational explanation other than the closet index fund one and FSD doesn't believe that is an acceptable reason to liquidate fund and pay another sales charge.  Both believe they are looking out for the best interest of the client, just disagree on the mechanics.    I got a wire today from my FSD on a switch out of AMCPX for ITHAX.  I answered it with something that didn't contain any attitude, got a switch letter signed from my client, and spent 10 minutes on the whole thing.  I guarantee it wasn't the trade, but Magician's attitude that cost him an hour on the phone.  [/quote]   And herein lays the problem. When it comes to mutual funds, this advisor has someone looking over his shoulder second guessing his investment recommendations. Whether that person is a supervisor, or a compliance person their intersts are not aligned with those of the client. Both of these individuals put the firm's best interests ahead of those of the client. Whether it be to protect the shelf space income or to reduce compliance exposure to regulators, neither of these people is thinking of the client when they make the call to question a trade, or when they bounce a trade.  It's gotten so bad in some places that some BOMs don't want any switches on their trade blotters, regardless of the circumstances. They don't want anything that would cause compliance auditors to spend more time in their office. Of course that's wrong. That they claim to be acting in the client's best interest in their decision making process that is just so much smoke.   A number of years ago I did a mutual fund switch that moved shares of AF's Capital Income Builder to a muni fund from another manager.  The client's investment objective had changed, the shares had been held for 12 years, and were all profit. It wasn't a big trade, nor was it a substancial percentage of the client's assets. Relatively speaking it was a  minor trade. I also met all the requirements of the firm for doing a switch, LT hold etc. In fact, because it was held for over five years, a switch letter wasn't required.    I knew it was time to move from that firm when I got a call from compliance not only questioning the trade but also recommending another American Fund to exchange into. Are you kidding me? When I politely pointed out that the fund the compliance person was recommending wasn't a tax free fund and didn't fit the client's new investment objective she became exasperated, told me she wouldn't approve the switch, and hung up on me. I later found out that she was a failed broker who had flunked out at not one, but two firms. It was easy to see why she failed. Yet this failure who had no business anywhere near client accounts now held sway over how those clients could invest. This same story plays itself out at every firm everyday. The tail wags the dog.  
Jun 27, 2008 2:28 pm

WELLL…Bondguy…obviously you’ve never worked at Edward D Jones and Companies.  IF you had you would know that it aligns itself with the client ALWAYS.  You must be totally mistaken if you think Jones management, compliance, janitors or other low lifes not named, would feel compelled to protect its “shelf space” revenue stream.  Other words, our shit don’t stink …thank you.  Magician…you need to move the clients back to the American Funds, go to mass, repent, have your ass spanked(I suggest asking Miss Jones), and work the next Saturday Promo…

Jun 27, 2008 3:00 pm

Magician:

  Been there, done that, and I went Indy.  The reason that Compliance is harder on you that us Indy's is that Jones has to show the regulators that they can supervise IRs in the field from St Louis.  The other firms in the business have a supervisor/ compliance officer on staff called a branch manager in their office.  When you go Indy, you are licensed as a Series 24 and you are the branch manager.  Compliance does get easier over here but you still have to deal with them.   IndyEDJ
Jun 27, 2008 7:17 pm

[quote=IndyEDJ]Magician:

  Been there, done that, and I went Indy.  The reason that Compliance is harder on you that us Indy's is that Jones has to show the regulators that they can supervise IRs in the field from St Louis.  The other firms in the business have a supervisor/ compliance officer on staff called a branch manager in their office.  When you go Indy, you are licensed as a Series 24 and you are the branch manager.  Compliance does get easier over here but you still have to deal with them.   IndyEDJ[/quote]   Very good point.  Lack of field BOM's creates a higher degree of required oversight in order to maintain our single-broker office setup.  But again, that's why you should just answer the FSpend politely and move on.  All Compliance is looking for is a documented explanation.