Small account - would like advice

Avoid the bank, any “advisor” there is just selling mutual funds or fixed annuities. He or she didn’t make it somewhere else. TRP is fine if you don’t play too much and want to do it on your own for a few years. Get it up to 50k and then get a referral for an advisor.

I'm guessing that he sold you $33,000 of "A" shares in a fund family like American Funds.

The fact that they were "preferred" is not a bad thing.  It may have been a very appropriate investment for you.  A long term investment in an "A" share mutual fund is a very inexpensive way to invest.  

If he hasn't been honest with you, that is a different issue, but it is probably still not in your best interest to make a change.  Your annual expenses on this account (depending on the exact mix of investments) may be under .6%.

  He is not making any money from your account.  (His ongoing quarterly compensation from this account is probably $33,000 x .0025 x .4 x .25 =$8.25.  Unless you have significantly more money to invest, you most likely won't find an honest broker willing to handle your account.  Why?  It is in your best interest to stay in the same fund family.  An honest broker will tell you this and nobody can afford to open an account for $8 in quarterly compensation.

You could, like you mentioned, move over to a no-load family like T. Rowe, but there is no advantage to you.

It probably is not a matter of honesty. Those poor chaps don’t know any

better. If they don’t sell the preferred funds they will feel the heat. Ask to

speak to his branch manager and see what he/she says. Seriously, I would

be surprised if you did not buy American Funds (since 85% go to this one

fund family at Jones) and if so then you are o.k.

I would pick Fidelity Investments over TRP. They have a better website, more products and better service than TRP. Morever there’s a good chance they have a Branch in your area. There sales reps. are not pushy and are not commission based. My .02

Who cares if they were preferred or not mr. investor. Have they served you well? Who even cares if he told you if they preferred. That doesn't even matter. Have they done. Do you feel is a good honest guy. All firms have "preferred Funds" even on the independent side. Get over that notion.

Btw, it will be tough to find anyone who wants to "manage" your small acct. If he's a goood honest rep, you're lucky he returns your phone calls. Stick with him.

Just because the funds are on the EJ preferred list does not mean that they are not good funds.  In fact , my guess is that every fund family on the EJ preferred list is a very solid company.  People on this board gripe about the preferred list because, as professionals, they would like more choices when providing solutions to clients.

It's o.k. if you dont like your advisor but I would tell you to be straight with him and then explore all the options within the fund family that you are already invested in.  To move to a direct fund company (TRP, Fido etc.) you are going to lose the load you already paid just to do an allocation that you most likely could have completed with your present fund company.  You will not incur any charges to re allocate where you are now.

Not sure what your gripe is…I work at EDJ’s…DON’T drink the Kool aid…and use American funds as my number 2 fund family.  Believe me…the hype of preferreds are WAY over blown.  The person who benefits the most from the preferreds are the GP"S…not the broker.  The GP’s are our problem, under educated and overly compensated.  But if your mad about Revenue sharing…you couldn’t go very many places and get any better…no load to me means little advice unless you use in a wrap situation.  If I were you, I’d work more on getting more than 33k into my roth and less on the Very small compensation this broker gets on putting you into one of the biggest and most successful fund company’s…American Funds.  My .03.  The world would be a better place with larger Roth balances and less GP’s!!!

[quote=williebrown]First off - I am not a broker and apologize if I am not welcome here.

I recently found out that all the funds my Edward Jones rep has
recommended to me were in their “preferred family” of funds and I feel
that he has been less than honest with me. He has my Roth IRA
($33,000) and I intend to transfer it, but have no idea where.
I am leaning toward T. Rowe Price, but I wonder if it would be
worth my time to go to my local bank and inquire about any financial
planning they offer.
I am at a loss as to where to go, and wonder what the professionals would advise a person with a small account.

Thank you very much for your time. [/quote]



After the big hit from the sales load, the on going expenses are
usually quite reasonable and dividends are reinvested into new A shares
without the sales load taken out. Chances are the fund(s) chosen are a
good fit for your situation.



Fundamentally stockbrokers are in the business of selling (brokering)
securities. Payment is based upon the sales of securities, and
everything else is purely incidental.



If your relationship with the broker has been hopelessly damaged, but
you still want personal service, you can ask to have your account
transfered to a different broker within the company.



If you transfer your account to T rowe Price, I would suggest
purchasing their target date retirement funds. These are designed to be
a complete investment program in one fund, requiring no further effort
on your part. For 95% of investors, investing for retirement, these
funds are the correct choice.



TROW target date funds tend to be a bit too heavy on stocks for my
taste. So I would probably stick about 5-10% into PRIPX “T. Rowe Price
INFLATION-PROTECTED BOND”, and the remainder into the correct target
date fund.



My $0.02

[quote=derekgaddy]I would pick Fidelity Investments over TRP. They have
a better website, more products and better service than TRP. Morever
there’s a good chance they have a Branch in your area. There
sales reps. are not pushy and are not commission based. My
.02[/quote]



My guess is that all this man needs is a target date fund, Fidelities funds are as good as any.



Don’t the other discount brokers (Scottrade/Ameritrade/Schwab etc) have
non commission reps that could put him into a target fund with a bit of
hand holding?

[quote=AllREIT]

[quote=williebrown]First off - I am not a broker and apologize if I am not welcome here.

I recently found out that all the funds my Edward Jones rep has
recommended to me were in their “preferred family” of funds and I feel
that he has been less than honest with me. He has my Roth IRA
($33,000) and I intend to transfer it, but have no idea where.
I am leaning toward T. Rowe Price, but I wonder if it would be
worth my time to go to my local bank and inquire about any financial
planning they offer.
I am at a loss as to where to go, and wonder what the professionals would advise a person with a small account.

Thank you very much for your time. [/quote]



After the big hit from the sales load, the on going expenses are
usually quite reasonable and dividends are reinvested into new A shares
without the sales load taken out. Chances are the fund(s) chosen are a
good fit for your situation.



Fundamentally stockbrokers are in the business of selling (brokering)
securities. Payment is based upon the sales of securities, and
everything else is purely incidental.



If your relationship with the broker has been hopelessly damaged, but
you still want personal service, you can ask to have your account
transfered to a different broker within the company.



If you transfer your account to T rowe Price, I would suggest
purchasing their target date retirement funds. These are designed to be
a complete investment program in one fund, requiring no further effort
on your part. For 95% of investors, investing for retirement, these
funds are the correct choice.



TROW target date funds tend to be a bit too heavy on stocks for my
taste. So I would probably stick about 5-10% into PRIPX “T. Rowe Price
INFLATION-PROTECTED BOND”, and the remainder into the correct target
date fund.



My $0.02





[/quote]

All of you should be very careful about rendering any specific advice to a gentleman whom you do not know on a bulletin board that is essentially open to the public.  Food for thought…

williebrown,



One in three dollars invested in mutual funds in 2005 went into
American Funds. Brokers from all around are using american funds. They
are preferred b/c EDJ and american have had a long standing
relationship and obviously EDJ pushes for their brokers to use them b/c
they are great funds. EDJ has limited choices to make it easier for
their brokers to mess up as least as possible.

When the whole revenue sharing fiasco broke, luckily I had used American for about 75% of my book.  After I explained to clients that if I was trying to squeeze an extra buck out of them, I would NOT even mention American Funds. They hit breakpoints earlier, their payout is lower, and they don't pay trails for 13 MONTHS!  And, the revenue sharing number is the lowest of all the preferred funds.

After showing clients that if I had put them in AIM, Columbia, Scudder, Oppenheimer, etc. (ie, any non-preferred fund), the trails the first 13 months would make me more than the stupid revenue sharing from American, the clients usually understood that I wasn't trying to screw them.

To me, the fact that with all those financial negatives to the broker, they are still Jones's #1 fund family, means that the vast majority of Jones is trying to do what is right for the client. 

[quote=now_indy]To me, the fact that with all those financial negatives
to the broker, they are still Jones’s #1 fund family, means that the
vast majority of Jones is trying to do what is right for the
client.[/quote]



By protecting the client from better fund choices?

williebrown,

Everyone here is assuming you are in American Funds, because that is the bulk of EDJ business.  If your are, then you are invested with one of the world's premier money managers and your broker did the right thing.  IMO, they are far and away superior to EDJ other preferred funds (and pay the least), and the case can be made that they are the most consistently performing of all fund families (I am looking for a different fund family that I can invest with the same level of confidence, but have yet to find one).

If you are NOT with American Funds, then your broker was probably influence by either the higher preferred family payout, or bought into the EDJ propaganda that brokers should "diversify" their own book of business by using other preferred vendors.       

[quote=AllREIT][quote=now_indy]To me, the fact that with all those financial negatives to the broker, they are still Jones's #1 fund family, means that the vast majority of Jones is trying to do what is right for the client.[/quote]

By protecting the client from better fund choices?
[/quote]

I didn't say that they ARE doing the right thing for the client, I said they are TRYING to do the right thing for the client.  As for better fund choices, that can be debated. I happen to think American Funds are very good.

I just meant that a lot of people (including some of the press) made it sound like Jones brokers were trying to screw the client to make an extra buck. The fact that American is the #1 fund family at Jones (by far) proves this to be incorrect.

[quote=now_indy]

[quote=AllREIT][quote=now_indy]To me, the fact that
with all those financial negatives to the broker, they are still
Jones’s #1 fund family, means that the vast majority of Jones is trying
to do what is right for the client.[/quote]

By protecting the client from better fund choices?
[/quote]

I didn't say that they ARE doing the right thing for the client, I said they are TRYING to do the right thing for the client.  As for better fund choices, that can be debated. I happen to think American Funds are very good.[/quote]

They are good, but its a limited toolset from which to work off of. Still, no one is going to too far from wrong with American Funds, but it is still a limited toolset. Which means that you cannot provide the best standard of service

Firstly, they don't have target date funds. To me that is a big turn-off. If you have small accounts these are good because they require no input from you. This is important cause small accounts can grow to be large accounts.

They don't have a TIPS/Real Return fund.  Also a big turn off,  I think TIPS are a critical part of  diversified portfolio, plenty of good research showing TIPS diversify both stock and bond risks.

They don't have a REIT fund.

I would say most investors are underexposed to TIPS, junk and REITs. So when I build portfolio's the core is a target date fund, to which I add side allocations of TIPS, junk and hand picked REITs. It used to be that you could just invest in a REIT index, but most REITs are so dangeriously overvalued, that that is unsafe these days.

American Funds have great investment options-but they arent the godsend that some FA's claim them to be. I would put any of Tom Marsico's LC Growth funds against Growth Fund anyday. I'll also take Chris Davis versus Washington Mutual or ICA any day. Give me Dan Fuss over Bond Fund or Income Fund.. How about Janus International Growth over Europacific... Blah blah blah...

Point is, there are better options out there but most FA's are lazy and stick with AF's.... I had a 500K producer tell me once that he uses AF's because they "are an easy sell".... Yeah thats great, and they are, but is that truly the best option for the client? Most FA's just plug in AF's and let it go.

I feel the trus value we can bring to the table is being able to sift through the myriad of managers out there and find those managers who consistently add alpha, ultimately ending in higher account values than one would see with AF's......

I dont know how EdJ is set up. But I will tell you in the past I focused on one or two fund families. After all there are too damn many of them out there . I don’t know the broker who you are working with but I can tell you that with the amount of money you brought over , I PROBABLY would have done the same thing as him. Which is allocate you in a nice mix of funds. Keep investing and you will be fine

No fund is “godsend” they can all turn to s—. I’m not positive but
the funds you named have big min investments. Like the Janus Int Growth
is 500,000. While at American its 250. Yes for the past 5 yrs janus int
has done 18+ %. The europacific is about 15 or 16. The difference also
can be looked at with fees. After you take your fee-based and your
higher trails you are probably not adding alpha like you think. One
reason AF is well liked is b/c they keep their costs down. And for the
record I’m not a big fan of Washington Mutual.  ICA is great
though. I don’t understand why someone picking AF is lazy. I’ve talked
to several brokers from different firms. They like them b/c they know
they are good and have had good success in the past. I could see that
you would like to offer something else to a client though instead of
what everyone else is recommending. 

I think AF is a great CORE fund family.  They have great equity-income and growth-income funds (Capital IB, Income Fund of Am, Fundamental Inv, Capital World G&I).  I don't know any fund that has better long-term RISK ADJUSTED returns than Capital Income Builder.  And trust me, I keep looking.  However, they do not have the best growth funds or bond funds.  If I have a lot of money to work with, I will use them as core holdings, then expand to others for Growth and Bonds.  But it's tough if you only have 100K and are trying to hit a breakpoint.  I like Columbia and Templeton Growth for growth.  I like to use Franklin Templeton for their Muni funds and Mutual Shares also.  And here's hoping that Dan Fuss drinks from the Fountain of Youth!  That guy's the REAL bond king.

To be honest, has anyone REALLY heard of someone choosing fund families because of the revenue sharing deals??  I don't even know what each contributes.  I am not even sure how/if I benefit from revenue sharing.  I think it just goes into the company coffers like most brokerage firms.  I would hazard to guess that most Jones IR's pick the fund families that they like the best, that can get them a well-rounded portfolio (in order to hit breakpoints).

Maybe I am just naive.

24, I agree with you.  I was at Jones over 2 years before they even told us about revenue sharing. And, like you said, I didn't even know how much each fund family contributed until that stupid revenue sharing letter came out.

Because I never received a bonus, and did not have LP or GP, the only money that went into my "pocket" due to Revenue Sharing was some piece of the profit sharing contribution (which was usually 3% to 5% of my net) I received each year.

[quote=blarmston]

American Funds have great investment options-but
they arent the godsend that some FA’s claim them to be. I would put any
of Tom Marsico’s LC Growth funds against Growth Fund anyday.

 (Snip)

I feel the trus value we can bring to the table is being able to sift through the myriad of managers out there and find those managers who consistently add alpha, ultimately ending in higher account values than one would see with AF's.[/quote]

I'm a hard core value guy, but I have to admit Marisco is very good at what he does. The international oppertunities fund is nice.

My own philosophy is that clients are over exposed to the US market, because they live in this country. Hence the need for more overseas exposure. Since I can't spend the time to pick stocks overseas, then I can add value by recomending a good overseas fund.

Long term, performance sells!!

If you arent going to pick stocks, at least pick funds.

Broker and now:  you are right up to a point.  But the point is EJ guys and gals sell what is put in front of them–or hopefully the BEST of what is put in front of them.  But guess what is put in front of them (or has been in the past) almost exclusively?  Start with pre and ends with furred (misspelling intentional).

I do know of EDJ brokers that sold Hartford, Putnam and others because of profit sharing.  They convinced themselves that it didn’t matter what fund family you used because they’re all good (or they wouldn’t be preferred!) and asset allocation makes up 90% of the performance.  So they figured why not sell the fund families with the highest ytb (yeild to broker).  

The point is- there are numerous options out there that consistently beat AF's. Our job is to find those opportunities and place our clients assets in them.

I love seeing a brokerage statement that has 90% in 4 AF's. I can rip that strategy to shreds.

"Mr. Prospect, you have 600K with UBS (SB, MS, whatever). 550K of your Rollover IRA is with American funds. Do you really think, given the capabilties and options your current broker has, that your money is in the best possible place?"

I would bet blarmston that you don’t run into many EDJ accounts. You
are obviously dealing with HNW individuals and I agree that they do
need and deserve better investments. Here again though, for your
$250,000 client, AF is great. If you do run into EDJ accounts, have you
seen any of the MAP through Goldman yet. I met a million dollar
producer w/EDJ that does a good bit of these. He is in a very affluent
area and has a lot of 401ks.

[quote=rook4123]I would bet blarmston that you don’t run into many EDJ accounts. You
are obviously dealing with HNW individuals and I agree that they do
need and deserve better investments. Here again though, for your
$250,000 client, AF is great. If you do run into EDJ accounts, have you
seen any of the MAP through Goldman yet. I met a million dollar
producer w/EDJ that does a good bit of these. He is in a very affluent
area and has a lot of 401ks.
[/quote]



Everyone needs and deserves better investments



Which is why I keep banging on about target date funds/risk allocation
funds, if you can’t manage the accounts investments properly, then make
sure it is invested in something that is self managing.



Blarmston, (I think) would have a hard time convincing someone that say
90% allocated to an American Century Livestrong fund, and 10% to PIMCO
Real Return, that their assets weren’t well managed in the context of a
small account.



But to see just four AF in a large account suggests that someone isn’t
adding alot of visible value. Otherwise how did these account
statements end up infront of another advisor to critique.



 

You will be hard pressed to find a lot of people in New England who have even heard of American Funds.  I know they are huge in the west, but around here we have Fidelity, Vanguard, Putnam, MFS, and insurance cos. like Hancock, Pru.  I had never even heard of American until a few months ago but my brother in law is a wholesaler in AZ and competes against them.  I guess they are like the Fidelity of the west?  Of course, I am not a broker, just a hobbyist. 

Cowboy and Vagabond - a couple things:



1. I am constantly in pursuit of a family of funds that can beat the risk

adjusted returns at American. Not because I dislike them, because I just

want to prove to everyone that they are out there, and to give me some

more options. But it is REALLY hard to do! I do use other preferred

funds(Franklin Templeton, Federated, Goldman), as well as non-

preferred’s (sparingly), but American is a really good core family to use.



2. So, how exactly do I benefit directly from revenue sharing? You stated

that the brokers you know used preferred funds to improve the YTB. But

how does a higher revenue share improve MY yield? I have yet to see

anything that comes directly to me. Maybe it used to and has changed in

the last year?(before I joined The Firm).

[quote=barharbor1]You will be hard pressed to find a lot of people in
New England who have even heard of American Funds.  I know they
are huge in the west, but around here we have Fidelity, Vanguard,
Putnam, MFS, and insurance cos. like Hancock, Pru.  I had never
even heard of American until a few months ago but my brother in
law is a wholesaler in AZ and competes against them.  I guess they
are like the Fidelity of the west?  Of course, I am not a broker,
just a hobbyist. [/quote]



IMHO (And this advice is worth what you paid for it, not a solicitation to buy/sell etc etc etc)



Boston is a big hub for money management.



It’s where Fidelity,Putnam, and a whole bunch of insurance companies
were based/developed. Alot of smaller companies you never heard of like
Wellington Asset and Loomis and Sayles, are located in boston, and they
subadvise many other fund families. L/S’s Dan Fuss is one of the best
fixed income managers out there. (Easiest way to acess Dan Fuss is via
Managers Bond Fund)



So if you are in the northeast its what you grew up with and knew.



Who does your brother wholesale for?

barharbor1, 

The reason that you never heard of American Funds is probably because:

1)You are brand new to the industry.
2)You never paid much attention to the industry before getting involved.
3)American Funds doesn't advertise.

4)You've only had one or no jobs in the past that had a qualified retirement plan.

Are my guesses correct?  I'd be very surprised if in NE over the last 5 years, American Funds has not had as much inflows as any other family.

Blarnstorm, I'd be concerned about someone recommending changes to an $800,000 "A" share American Funds portfolio.  We're talking about funds with a great long term track record of success and depending on the mix of funds, the investor is paying total annual expenses of around .7%.  How much is it going to cost the person to make the change?  How much additional is it going to cost the person on an annual basis?  What do you have to offer that you have a great certainty that it will beat the AF portfolio by more than this cost difference?  (I'm not talking about selling AF vs. something else.  I'm simply talking about replacing them.) 

[quote=barharbor1]You will be hard pressed to find a lot of people in
New England who have even heard of American Funds.  I know they
are huge in the west, but around here we have Fidelity, Vanguard,
Putnam, MFS, and insurance cos. like Hancock, Pru.  I had never
even heard of American until a few months ago but my brother in
law is a wholesaler in AZ and competes against them.  I guess they
are like the Fidelity of the west?  Of course, I am not a broker,
just a hobbyist. [/quote]



barharbor

American Funds are one of the largest fund families. They are big
everywhere. I would look into them. Matter of fact, they might be the
largest now.

"Blarnstorm, I'd be concerned about someone recommending changes to an $800,000 "A" share American Funds portfolio.  We're talking about funds with a great long term track record of success and depending on the mix of funds, the investor is paying total annual expenses of around .7%.  How much is it going to cost the person to make the change?  How much additional is it going to cost the person on an annual basis?  What do you have to offer that you have a great certainty that it will beat the AF portfolio by more than this cost difference?  (I'm not talking about selling AF vs. something else.  I'm simply talking about replacing them.) "

I dont think I ever suggested that I would blow out AF A-shares and do something completely different. A good holding to keep would be the Income Fund, and then I would either reallocate to some of our CDP managers who would add alpha, or simply add on several MF managers that are better than AF in their respective asset class.

I will give one example. I would trade in Europacific ANY DAY to have international exposure through Janus Advisor International Growth and Alliance Bernstein International Value. Those two funds hit every capitalization, with a healthy weighting to emerging markets as well. Run the numbers- those two funds consistently outperform Euro on a risk-adjusted basis.

Thats our job- to find the best managers and give our clients access to them.

[quote=Broker24]Cowboy and Vagabond - a couple things:

1. I am constantly in pursuit of a family of funds that can beat the risk
adjusted returns at American. Not because I dislike them, because I just
want to prove to everyone that they are out there, and to give me some
more options. But it is REALLY hard to do! I do use other preferred
funds(Franklin Templeton, Federated, Goldman), as well as non-
preferred's (sparingly), but American is a really good core family to use.
I agree 100%.  I have no issue with anyone using AF, and I too would love to find another option that is just as good.  My issue is that if you are building an A share portfolio of more than one or two funds and using anything other than AF, then I think you have a hard time justifying this. 
2. So, how exactly do I benefit directly from revenue sharing? You stated
that the brokers you know used preferred funds to improve the YTB. But
how does a higher revenue share improve MY yield? I have yet to see
anything that comes directly to me. Maybe it used to and has changed in
the last year?(before I joined The Firm).
You probably don't benefit, yet.  You benefit once you are profitable and eligible for bonus.  Revenue sharing is like trails, it starts small but adds up as you grow assets.  The difference today is that EDJ now combines the Rev Sharing from the different funds and pays you based on your average MF assets, they used to pay you based on how much of each Fund Family was in your book (If you had $10M in Hartford your Rev Sharing was much higher than if you had $10M in AF, now it is the same) . 

I know that there are a lot of EDJ brokers who didn't know what Rev Sharing was or what the differences between Preferred Funds were until the issue became public.  HOWEVER, I do know EDJ brokers who DID understand Revenue Sharing and built their book based on what funds would pay them the most.  I also had Preferred Fund vendors show me "unofficially" the difference that building a book of their funds would make to my future income.  So now whichever Preferred Fund the individual broker chooses has little effect on his/her bonus, but EDJ has a huge incentive to keep pushing higher paying Preferred Funds.   
I'm not saying all EDJ brokers are bad.  Most are basically honest folks with good intentions.  But if you are selling funds other than AF, look at why you are doing it.  Is it really because they offer something different or better (e.g. REITs, GS Asset Allocation, Franklin Income), or is it because you have been convinced by the propaganda that you need to "diversify" your book.     

Also remember that originally williebrown was asking about his account.  Everyone has assumed he had AF (I don't believe he ever confirmed this).  I was merely trying to point out that if he does have AF, it is hard to fault his broker.  If he doesn't have AF then he may have reason to question the motives of EDJ. 

[/quote]

[quote=williebrown]First off - I am not a broker and apologize if I am not welcome here.
I recently found out that all the funds my Edward Jones rep has recommended to me were in their "preferred family" of funds and I feel that he has been less than honest with me. He has my Roth IRA ($33,000) and I intend to transfer it, but have no idea where.
I am leaning toward T. Rowe Price, but I wonder if it would be worth my time to go to my local bank and inquire about any financial planning they offer.
I am at a loss as to where to go, and wonder what the professionals would advise a person with a small account.
Thank you very much for your time. [/quote]

You shouldn't trust any broker who would take an account as small as yours.