Arbitration and The Green Machine
Having just gone through the Arbitration Process with Edward Jones, I wanted to share some of the highlights.
First, the Arbitration Panel- which in my case consisted of Three Attorneys, was a very comfortable and beneficial process. At one point , the Panelists were asking questions about Edward Jones' infrastructure. After the GP representing EDJ explained it- several times- the head Arbitrator said "Let me see if I understand correctly.... an Edward Jones broker is required to work really hard to build their own book of business to a level of profitablility in order to get an offering of Limited Partnership, then must do EXTRA VOLUNTEER work for the firm in order to MAYBE get an additional offering and then they end up OWING the firm money for their efforts? This has gone on for HOW long?"[quote=munytalks] Having just gone through the Arbitration Process with Edward Jones, I wanted to share some of the highlights.
First, the Arbitration Panel- which in my case consisted of Three Attorneys, was a very comfortable and beneficial process.
At one point , the Panelists were asking questions about Edward Jones’ infrastructure.
After the GP representing EDJ explained it- several times- the head Arbitrator said “Let me see if I understand correctly… an Edward Jones broker is required to work really hard to build their own book of business to a level of profitablility in order to get an offering of Limited Partnership, then must do EXTRA VOLUNTEER work for the firm in order to MAYBE get an additional offering and then they end up OWING the firm money for their efforts? This has gone on for HOW long?”
[/quote]
It works for us.
And that’s why real brokers are so bemused by it all.
As an ex-Jonser that is one of the best ways I've seen it put. Short and sweet, and true. The LP is really oversold. Right before I resigned I was offered about $30,000 of LP and everyone thought I was so lucky. After all, the average return has been something like 18% per year. Then I thought about outside of the kool-aid jar: hmmm... I have to BUY this with money I could be using to invest somewhere else. If I could average 10% in a good mutual fund over the long haul than really it is only a 8% number (yes I know you can borrow for the LP but there is an interest rate). So on $30,000, that equates to $2,400 per year in extra income for me. I was grossing about $400,000 when I left so this equates to about 0.5% of my gross and about 1.5% of my net. Since going indy, my net net effective payout has gone from about 40% to almost 60%, or about $80,000 raise. Hmm.... $2,400 or $80,000.
Any EDJ IR that is doing over $250k gross should go Indy...ANYWAY you cut the numbers you are better off... not to mention you have the ability to use appropriate platforms to run your clients money, own your practice, can hire FA's under you, etc....A few questions for Indy4 life. How long ago did you make the move? How long before you changed the way you did business (fee based)? Have you hired fa’s under you and if so could you elaborate ? Thanks.
I am curious about the arbitration process. Can you go over what got you there? Did EDJ properly represent you? How scared were you? Did you hire your own attorney?
I’ve had one in my career. Jones did send a lawyer down to represent the firm. The fa is not named in the suit. That makes it more likely that the firm will settle. We went before one judge. You had their 2 lawyers, the plaintiff and the “expert” on one side of the table. My lawyer and I on the other side. It was unpleasant day and a half. But, their case was ridiculous and in the closing argument their lawyer was pleading with the judge not to make the plaintiff pay for our expenses. We won and the firm didn’t have to pay out a dime But, it shows that none of us are immune to this especially in a bad market. The case stemmed from the client losing 7.5% in 2000. Jones paid for everything and handled it well.doubleb
Geesh, all this over a 7.5% loss? I hope this ex-client spent 20% of his portfolio just bringing the suit! What a low-life!… The case stemmed from the client losing 7.5% in 2000. Jones paid for everything and handled it well.doubleb
“Real Brokers?” What is it that makes you a real broker but not I??
Is it the catchy name Philo Kvetch?
As for the LP - let’s take a $10M position purchased for $2500, the rest leveraged. That $10M LP paid out $2200 before interest this year. That’s rougly a 70% return after interest. Explain how that’s bad?
Hmmm… I’ve been sucked in again.
I’m going back into hiding.
Philo Kvetch chum the waters and caught a Hulk…How about just keeping 90% upfront to start with?
Show me an indy that has an office and an assistant that nets 90% and I’ll consider moving… Working out of your mom’s basement with her taking your calls doesn’t count.
Philo Kvetch chum the waters and caught a Hulk…How about just keeping 90% upfront to start with?
I tell you, if I had the energy or desire to set the whole thing up, move my clients, worry about all that other stuff, I would go indy. I'm just too lazy with all that. I think that's why I like Jones. I KNOW I could net more, even after expenses. I think I have to get to a level where I can hire someone to do it for me and not worry if some of my clients don't come over. Maybe when my kids are older and I have more free time...
With LPL, my net is about 60% after ALL Expenses (that includes $1000/month for health insurance). I was lucky to net over 35% at Jones after they had deducted office expenses, health insurance, half phone/postage, etc. I work in a very nice office, and share my rent with a number of other LPL reps, so that helps.
And, now I own my business. And, I don't have to deal with a regional leader asking why I had a bad month. And, I don't have to pretend to recruit for Jones. And, instead of 5 insurance companies, I can now work with over 20. And, I can offer the client multiple ways to pay for their variable annuity or mutual funds. And, you get the idea.all of the above…plus 65%net for me!
And now I can sell my business when I retire.
And now I can have outside business activities. (This can be bigger than you realize.)
Those div trips were a lot of fun though.[quote=Incredible Hulk] “Real Brokers?” What is it that makes you a real broker but not I??
Is it the catchy name Philo Kvetch?
As for the LP - let’s take a $10M position purchased for $2500, the rest leveraged. That $10M LP paid out $2200 before interest this year. That’s rougly a 70% return after interest. Explain how that’s bad?
Hmmm… I’ve been sucked in again.
I’m going back into hiding.[/quote]
Since you’re counting outside investments in your compensation, my Berkshire Hathaway holdings have consistently blown your LP out of the water…and the only limit on how much I can own is how much I can afford.
Show me an indy that has an office and an assistant that nets 90% and I’ll consider moving… Working out of your mom’s basement with her taking your calls doesn’t count.
Many indy shops, mine included, net far in excess of 90%. In point of fact, I netted in excess of 100% last year.
Why do you find it so difficult to comprehend?
I agree with all you guys. Again, I am just too lazy or comfortable to move yet. I think I am also not ready to be completely on my own yet (until I am at the point where I could build a team). I have a great group of guys in my area, and we all get along great, help each other, etc. I would not enjoy complete solitude as a solo.
I actually find it sort of humorous that all the EDJ guys try to convinve the Indy's that life is better than it is at Jones, and the Indy guys try to convince all the EDJ guys to leave for Indy. Fact is, both channels have merit. It also depends what stage you are at. But I still find it funny the way everyone swings their %^#'s around about it.[quote=Broker24]
I agree with all you guys. Again, I am just too lazy or comfortable to move yet. I think I am also not ready to be completely on my own yet (until I am at the point where I could build a team). I have a great group of guys in my area, and we all get along great, help each other, etc. I would not enjoy complete solitude as a solo.
I actually find it sort of humorous that all the EDJ guys try to convinve the Indy’s that life is better than it is at Jones, and the Indy guys try to convince all the EDJ guys to leave for Indy.
Fact is, both channels have merit. It also depends what stage you are at. But I still find it funny the way everyone swings their %^#'s around about it.[/quote]
Quite right, B24. I’ve said it before, and I’ll say it again: If you’re happy where you are, then I’m happy for you.
[quote=Philo Kvetch]
Quite right, B24. I’ve said it before, and I’ll say it again: If you’re happy where you are, then I’m happy for you. [/quote]
Really? Because what I read was:
[quote=Philo Kvetch] And that’s why real brokers are so bemused by it all.[/quote]
Were you also for the war before you were against it?
Not to rain on your parade my diminutive green friend, but the statements are not contradictory.
I can, for example, be amused watching a cat play with a string and be happy for the animal's pleasure. That does not, however, make the cat my equal.I can, for example, be amused watching a cat play with a string and be happy for the animal’s pleasure. That does not, however, make the cat my equal.
[quote=Philo Kvetch] Not to rain on your parade my diminutive green friend, but the statements are not contradictory.
I can, for example, be amused watching a cat play with a string and be happy for the animal’s pleasure. That does not, however, make the cat my equal.[/quote]
Hey, what are you trying to say??
[quote=Broker24] [quote=Philo Kvetch] Not to rain on your parade my diminutive green friend, but the statements are not contradictory.
I can, for example, be amused watching a cat play with a string and be happy for the animal’s pleasure. That does not, however, make the cat my equal.[/quote]
Hey, what are you trying to say?? [/quote]
He’s saying that the string is his equal and he hopes to be a cat someday.
He is saying the string is being screwed by the GPs and the cat doesn’t do enough fee-base business.
Doubleb: to elaborate, I made the move about 3 years ago. Since that time all new business has been fee-based except for the occasional VA ticket. I've been converting old EDJ clients into fee-based where appropriate but it is not always. So my book is about 50% fee-based advisory accounts, 25% C-shares and VA's, and the rest in old A-shares (primarily american funds buy-and-hold portfolios). But it is wonderful to have the choice and recommend what makes the most sense for the client and to be able to use all the great no-load funds out there. I don't have any FA's under me yet but only because I have not found the right guy. I'm not really actively looking yet either but plan to this year.
Philo - touche
He is saying the string is being screwed by the GPs and the cat doesn’t do enough fee-base business.
Philo, I hate to be the one to rain on your parade, but just running a quick hypo on your BRK B for the last 10 years tells me that you have averaged about 10.5%, where the Jones LP has averaged 22.5%. Let's say we both started with $10,000 in our investments. If I would have just simply taken the interest and stuck it in my sock drawer (no additional interest) I would have $32,500 today. You'd have $27,000. That's without earning a single penny in additional interest on that LP return. I'm GUARANTEED 7.5% every year. Is Warren going to do that for you? Ted Jones did it for us.[quote=Incredible Hulk] “Real Brokers?” What is it that makes you a real broker but not I??
Is it the catchy name Philo Kvetch?
As for the LP - let’s take a $10M position purchased for $2500, the rest leveraged. That $10M LP paid out $2200 before interest this year. That’s rougly a 70% return after interest. Explain how that’s bad?
Hmmm… I’ve been sucked in again.
I’m going back into hiding.[/quote]
Since you’re counting outside investments in your compensation, my Berkshire Hathaway holdings have consistently blown your LP out of the water…and the only limit on how much I can own is how much I can afford.
Spiff;
1) I’m not talking about BRK.B
2) I suggest you re-check your numbers.
OK. I ran the same thing on BRK A. Same results.
Philo, I checked BRKA and B. Both of the numbers Spiff listed are correct. On the other hand, this is exactly 10 years. Depending on your actual holding period, it could be more or less. For example, a 20 year holding period on BRKA would have returned 21%, which is almost as good as EDJ partnership (not reinvesting dividends). And you may have used 50% margin, which improves the return. But then we would have used 75% margin, so, moot point. And with our margin, our interest checks pay back the loans. We don't have to sell shares or use cash to pay it back. Bottom line, EDJ LP is a pretty good deal if you can get enough to matter. Anyone that can get a guaranteed 7.5% return and use 75% margin to buy in has a pretty sweet deal. The only problem you run into with LP is the tax affect. This is probably what you are referring to. Since it is ordinary income, it can really chew through returns. That is my biggest beef with LP. Then again, most guys (and gals ) are using this as a retirement annuity, so they just have to deal with making 20%+ in taxable income. But if you are in the 38% tax bracket (combined), that's really only like 12.5% after taxes. So I am guessing that the tax issue is where your argument comes in? Valid point.Spiff;
1) I’m not talking about BRK.B
2) I suggest you re-check your numbers.
Philo, I checked BRKA and B. Both of the numbers Spiff listed are correct. On the other hand, this is exactly 10 years. Depending on your actual holding period, it could be more or less. For example, a 20 year holding period on BRKA would have returned 21%, which is almost as good as EDJ partnership (not reinvesting dividends). And you may have used 50% margin, which improves the return. But then we would have used 75% margin, so, moot point. And with our margin, our interest checks pay back the loans. We don't have to sell shares or use cash to pay it back. Bottom line, EDJ LP is a pretty good deal if you can get enough to matter. Anyone that can get a guaranteed 7.5% return and use 75% margin to buy in has a pretty sweet deal. The only problem you run into with LP is the tax affect. This is probably what you are referring to. Since it is ordinary income, it can really chew through returns. That is my biggest beef with LP. Then again, most guys (and gals ) are using this as a retirement annuity, so they just have to deal with making 20%+ in taxable income. But if you are in the 38% tax bracket (combined), that's really only like 12.5% after taxes. So I am guessing that the tax issue is where your argument comes in? Valid point.[/quote] ".......if you can get enough to matter." Here in lies the problem.... most jonesers fight over the peanuts and are lucky if they even get any LP to begin with. I have a friend at jones that always says how great that LP is and all, but the problem is that his Seg 4 arse has exactly zero, squat, zilch, notta of it. He has been with jones for over 7 years and in a leadership position in the region for about 5 years. for 90% of the Jones reps, LP is nothing more than a carrot and stick.... wanna play??.... anybody want to lead the saturday morning newbie meetings??.... Their is LP in it for you... maybe... at some point... just a little more "volunteer" work fellas.... it is right here..... come and get it!!! Anyway, you guys can have fun with that.[quote=Philo Kvetch]Spiff;
1) I’m not talking about BRK.B
2) I suggest you re-check your numbers.
You’ve got a valid point. The difference between a lot of company stock plans and Jones LP is that most company stock is available whenever you want it. Not so with the LP. Your friend is caught in that awkward bubble where he probably was brand new when the first round of LP came out about 6 years ago. Not profitable enough when it came out this last time. But he should get it when it comes out again in a couple of years. A buddy of mine similar to your friend was passed over a few years ago because of profitability, but got a good offer the last time around. He doesn’t do much in the way of volunteering, but they offered him $35,000 worth mostly on his profitability. Once you get offerings in the field they are typically substantial. It’s not a perfect investment, but you can’t argue that it’s not a good one.
FOOD FOR THOUGHT:
If I own $30,000 worth of BRK B or any other stock for that matter, I have paid for it and can sell any day the market is open. If I die, my heirs can keep it or sell with a step-up in cost basis. If I am 'offered' $30,000 worth of EDJ LP- it is a DEBT. I OWE Edward Jones $30,000. I cannot sell it anytime I want- nor can my heirs keep it or sell it. AND think about this: If I am 'offered' $30,000 worth of LP and Jones goes belly up- I will still have to PAY the $30,000 to the General Partners- General Partners have EQUITY Partnership in the firm. Limited Partnership is a DEBT TO THE FIRM. You DON'T OWN IT. I would still OWE the General Partners AND I wouldn't have a job anymore.Munytalks tells the real story of LP. LP is intended to make you FEEL special. And screw you in the end. The essence of the Jones culture.
It really is a shell game. And LP is the biggest shell in the Jones system. Spiff, noggin, B24 and any other Jones rep on this forum should really think long and hard before they try to defend management. Maybe all firms are like this, but I doubt it.And to put the ‘Frosting’ on this- in order to be ‘offered’ DEBT to the Firm you must FIRST work extremely hard to build your business to a level of PROFITABILITY to the EQUITY OWNERS (GP’s) of the Firm- THEN VOLUNTEER More of your time- away from your family- in order to be given a LARGER DEBT to the EQUITY OWNERS of the firm.
Say what you want- but this is really how it is. In any other Publicly Traded Firm, you are GIVEN Stock and Stock Options.I don't think that is correct.
If I was offered $30,000 of LP as an FA I would have to come up with $7500 upfront. The rest is a loan made through US Bank, not the GPs. The interest earned goes to pay off the loan. Just like if you bought a house, but carried a mortgage, if you sold the house you would keep the difference between the current loan payoff and the value of the home. If I sell my LP, I keep what I have already paid off. I CAN sell it any any time. Once it is completely paid for (like mine will be in the next 3 months) I don't owe Jones anything. In fact, they owe me 7.5% interest guaranteed for the rest of my life. If Jones goes belly up, there would be no more LP to pay for. Therefore, the loan would go away. If the firm owed anyone anything that couldn't be covered by cash on hand, the GPs would have to come up with the rest. As an LP, I don't owe them anything and I don't have to dig into my own pocket should the firm need the extra cash. Sure, I lose my investment, but the same thing would have happened to me if BRK went bankrupt. When I die, my family can't keep the LP, but they do get a check for the money I have invested. If I leave Jones, I cash out my LP and take a check to the bank. If I retire from Jones, I get to keep the LP as long as I live. It is not a stock investment. Nobody has ever said it was. It's what we have. It works for us. The good thing about it is that if you don't work for Jones, you don't really need to concern yourself with it.[quote=footsoldier]
Munytalks tells the real story of LP. LP is intended to make you FEEL special. And screw you in the end. The essence of the Jones culture.
It really is a shell game. And LP is the biggest shell in the Jones system. Spiff, noggin, B24 and any other Jones rep on this forum should really think long and hard before they try to defend management. Maybe all firms are like this, but I doubt it.[/quote] What part screws you in the end? I guess I'm gonna feel really screwed in the next few months when I start gettting that check deposited into my Jones account every month. Man, I hate it when that happens. They are soooo screwing me.[quote=munytalks]And to put the ‘Frosting’ on this- in order to be ‘offered’ DEBT to the Firm you must FIRST work extremely hard to build your business to a level of PROFITABILITY to the EQUITY OWNERS (GP’s) of the Firm- THEN VOLUNTEER More of your time- away from your family- in order to be given a LARGER DEBT to the EQUITY OWNERS of the firm.
Say what you want- but this is really how it is. In any other Publicly Traded Firm, you are GIVEN Stock and Stock Options.[/quote] No, you aren't. Most clients that I've worked with have to work their fingers to the bone to get any really meaningful stock options. They travel, work long hours away from their families, work while they are at home, stress about everything, and are basically owned by the company. And they don't get to say no. If you don't say how high when management says jump, you're out of luck. They'll just go on to the next guy who is willing to play the game. The volunteerism at Jones typically gets worked into your normal schedule. Unless you are the Seg 1 support specialist who runs the monthly New FA meetings in the evenings. All the other meetings that I go to are during the day. You just learn to work your biz around it. You have to work really hard to get your biz up and running anyway. So, that's really a moot point. You've got this debt to the firm issue all wrong. If you don't know what you are talking about you should really stop.Mr. Spiff,
I think YOU are mis-informed. You were 'offered' $30,000 LP? You had to put up $7500- then took out a Bank Loan for the Balance? Okay- where do you get the idea that if EDJ goes belly up your loan to US Bank 'goes away'? Why would a Bank write off a personal loan for you? Would your mortgage company make your house payment 'go away' if your house burnt down?Edward Jones does not have the legal ability to dismiss any unpaid for L.P. offerings if the firm needed cash.
Do you know WHEN and WHY LP is offered? Do you know what FORMULA is used to determine HOW MUCH LP will be offered? Start asking G.P.'s- see if you can find ONE who will explain it to you. The fact is- LP is offered when there is a disparity between EQUITY Partnertship and DEBT Partnership. And the $700 Million in the General Partnership fund is EQUITY to the G.P.'s .RE: Stock and Stock Options- Did you ever have any former employees of Chevron/ Wal-mart/ ATT/ Boeing / Exxon / Home Depot / Pfiser ?
I had many. The greeters at Wal-Mart are given Stock. As for 'jumping' when managments say how high, were you describing your Regional Leader?I was reading info on Scientology last evening. Sounds very very much like the Jones and LP setup. Pay to play…odd isn’t it. Discredit the ones who leave…lie lie lie is preached…a cult…Muny…Your arguing with a sucked in drone…Weddle could call him and say…“Spiffy, I’m sorry, but we’ve been screwing you for years”…and Spiff…would just shrug it off and jump on the phone with his 20 year HSBC subprime bomb…la la la la …I’m not listening…lalala
Wow… I could jump in this most inane conversation, but I have clients to call.
[quote=munytalks]FOOD FOR THOUGHT:
If I own $30,000 worth of BRK B or any other stock for that matter, I have paid for it and can sell any day the market is open. If I die, my heirs can keep it or sell with a step-up in cost basis. If I am 'offered' $30,000 worth of EDJ LP- it is a DEBT. I OWE Edward Jones $30,000. I cannot sell it anytime I want- nor can my heirs keep it or sell it. AND think about this: If I am 'offered' $30,000 worth of LP and Jones goes belly up- I will still have to PAY the $30,000 to the General Partners- General Partners have EQUITY Partnership in the firm. Limited Partnership is a DEBT TO THE FIRM. You DON'T OWN IT. I would still OWE the General Partners AND I wouldn't have a job anymore. [/quote] All true (except that you have it turned around - it is really debt to the limited partner - it's like buying a high-yielding bond - Jones pays YOU back upon death, termination, etc.). But I will take debt that guarantees 7.5%, which has averaged 25.5% over the past 30 years, for which I buy on 75% margin. It's WORST return over the past 30 years is like 15% (in 1988). Even in 2002 it returned 15.8%. Again, it's not perfect, but it's certainly nothing to turn your nose up at. I have never heard of one Jones advisor (other than the real tenured veterans) claim to stay or work for the firm simply because of the LP. Personally, I don't even consider it part of my "compensation" package, as they like to market it. I consider it an investment (that would be if, and when, I get some). Now if you stay long enough and get enough of it, it's a pretty sweet pension. If you look at the IRR on the 25% you put down, it's a real sweet deal for retirement. I think some people over-emphasize how much some of us really value LP with Jones. Besides, I'd rather take the higher payout of being indy than the LP ownership any day - that is if there were not other factors.[quote=munytalks]
Mr. Spiff,
I think YOU are mis-informed. You were 'offered' $30,000 LP? You had to put up $7500- then took out a Bank Loan for the Balance? Okay- where do you get the idea that if EDJ goes belly up your loan to US Bank 'goes away'? Why would a Bank write off a personal loan for you? Would your mortgage company make your house payment 'go away' if your house burnt down?Edward Jones does not have the legal ability to dismiss any unpaid for L.P. offerings if the firm needed cash.
Do you know WHEN and WHY LP is offered? Do you know what FORMULA is used to determine HOW MUCH LP will be offered? Start asking G.P.'s- see if you can find ONE who will explain it to you. The fact is- LP is offered when there is a disparity between EQUITY Partnertship and DEBT Partnership. And the $700 Million in the General Partnership fund is EQUITY to the G.P.'s . [/quote] Muny, Jones would not "dismiss" the debt. The LP would be returned to you, and you would use the proceeds to pay off the loan. It's like when you sell your house. The buyer pays you, and you pay off the mortgage. And if Jones goes belly-up, the GP's are on the hook for the LP balances (not the "loan" balance). Honestly guys, I don't think any of us are claiming that LP is anything more than it is. It's a very, very high yielding bond that we were able to buy on margin.spears - welcome back. Nice to hear from you again. Isn't any investment pay to play? Wouldn't I have to pay for $30,000 of BRK in order to play along with them? It's an investment. As long as it keeps paying me, I guess I will just keep shrugging it off. muny - upon further review, you bring up a good point. I would assume if Jones went bankrupt that my LP would just dissolve. Perhaps US Bank wouldn't like that. I'll have to do some further digging to see what would happen to my loan if Jones went out of biz. Not that I think it's going to happen. I would imagine they would sell the company before they went bankrupt. At which point, I'd get a payout on whatever the sales price was. Funny, the only people I've ever heard of that have bad mouthed the LP are the people who don't have any. Then it's usually sour grapes cause they wanted some and didn't get any.I was reading info on Scientology last evening. Sounds very very much like the Jones and LP setup. Pay to play…odd isn’t it. Discredit the ones who leave…lie lie lie is preached…a cult…Muny…Your arguing with a sucked in drone…Weddle could call him and say…“Spiffy, I’m sorry, but we’ve been screwing you for years”…and Spiff…would just shrug it off and jump on the phone with his 20 year HSBC subprime bomb…la la la la …I’m not listening…lalala
I will not “bad mouth” the LP. No I never stayed around long enough to get any. One of the points though being made in this argument is that LP is NOT as great as Jones leads people to believe. IMO it is obviously something you want when you have the chance, but is setup to more to keep people in love/tied to Jones. It is a carrot to keep you around/drinking the koolaid.
And don’t forget the strategy of diversification. Make sure you don’t invest more than 10% of your assets in LP. The reason you think LP is so fine is because you won’t ever get GP, even as good of soldier as you are to the firm.
Spiff- I have said it before, you seem too intelligent NOT to think for yourself and outside the Jones speak. The income you receive is good if you didn't have to pay for it with blood sweat and your hard earned 36% earnings. You will see the light eventually. I never wanted and was offered LP. I didn't want any debt, in fact I have been on a plan to pay off all debts in 10 years (including my mortgage). At Jones, I went into personal savings way too often and I was a Seg 4 broker living on the west coast. It never made any sense for me to take on more debt to buy a bond. How often have you advised a client to leverage their assets to buy a bond AAA or high yield (wouldn't compliance be all over you)?Spiff - it’s a business that is organized as a partnership. Creditors get paid first, General partners next. Limited partners last. The loan is a loan is a loan. You took out the loan because you didn’t have the money to buy it outright.
It’s essentially a preferred stock(it’s a partnership interest - it’s nonvoting equity that pays a high dividend) that is guaranteed to pay 7.5% with a non-qualified profit sharing component. You get paid more if the firm makes more profits.
Now, can we all stop being (*&@^
[quote=Philo Kvetch]Spiff; 1) I’m not talking about BRK.B 2) I suggest you re-check your numbers.
Philo, I checked BRKA and B. Both of the numbers Spiff listed are correct. On the other hand, this is exactly 10 years. Depending on your actual holding period, it could be more or less. For example, a 20 year holding period on BRKA would have returned 21%, which is almost as good as EDJ partnership (not reinvesting dividends). And you may have used 50% margin, which improves the return. But then we would have used 75% margin, so, moot point. And with our margin, our interest checks pay back the loans. We don’t have to sell shares or use cash to pay it back. Bottom line, EDJ LP is a pretty good deal if you can get enough to matter. Anyone that can get a guaranteed 7.5% return and use 75% margin to buy in has a pretty sweet deal. The only problem you run into with LP is the tax affect. This is probably what you are referring to. Since it is ordinary income, it can really chew through returns. That is my biggest beef with LP. Then again, most guys (and gals ) are using this as a retirement annuity, so they just have to deal with making 20%+ in taxable income. But if you are in the 38% tax bracket (combined), that’s really only like 12.5% after taxes. So I am guessing that the tax issue is where your argument comes in? Valid point.[/quote]
I don’t know where you and Spiff are getting your numbers, but they are, in fact, incorrect. I do know what I’ve paid each time I bought BRK and it bears no resemblance to what you’ve reported. Sorry guys, but you’ve been fed some bad info.
As a Jones person who worked for a S & P 500 company before Jones, I can tell you that I recieved stock options and I didn’t pay a dime for them. The idea of building a business to profitability and having to volunteer to help others without compensation all in the pursuit fo LP which you have to pay for yourself is an incredible concept… To each his own…
[quote=Ashland]Spiff - it’s a business that is organized as a partnership. Creditors get paid first, General partners next. Limited partners last. The loan is a loan is a loan. You took out the loan because you didn’t have the money to buy it outright.
[/quote]
You are right, you didn't pay for the OPTION to buy the stock, but had you chosen to excerise your option, you would have PAID for them at a predetermined price set by your company. If the company goes belly-up, what exactly are your options worth? Likewise, at Jones, some are given the optionto buy into LP. That option is free. However, excerising said option will cost you money at an amount set by Jones (or any other partnership).As a Jones person who worked for a S & P 500 company before Jones, I can tell you that I recieved stock options and I didn’t pay a dime for them.
[quote=chaz] [quote=Ashland]Spiff - it’s a business that is organized as a partnership. Creditors get paid first, General partners next. Limited partners last. The loan is a loan is a loan. You took out the loan because you didn’t have the money to buy it outright. [/quote]
General Partners are paid last in a liquidation. In order: Taxes, Secured Creditors, General Creditors, Limited Partners, General Partners.[/quote]
chaz, you’re correct…
[quote=Broker24] [quote=Philo Kvetch]Spiff; 1) I’m not talking about BRK.B 2) I suggest you re-check your numbers.
Philo, I checked BRKA and B. Both of the numbers Spiff listed are correct. On the other hand, this is exactly 10 years. Depending on your actual holding period, it could be more or less. For example, a 20 year holding period on BRKA would have returned 21%, which is almost as good as EDJ partnership (not reinvesting dividends). And you may have used 50% margin, which improves the return. But then we would have used 75% margin, so, moot point. And with our margin, our interest checks pay back the loans. We don’t have to sell shares or use cash to pay it back. Bottom line, EDJ LP is a pretty good deal if you can get enough to matter. Anyone that can get a guaranteed 7.5% return and use 75% margin to buy in has a pretty sweet deal. The only problem you run into with LP is the tax affect. This is probably what you are referring to. Since it is ordinary income, it can really chew through returns. That is my biggest beef with LP. Then again, most guys (and gals ) are using this as a retirement annuity, so they just have to deal with making 20%+ in taxable income. But if you are in the 38% tax bracket (combined), that’s really only like 12.5% after taxes. So I am guessing that the tax issue is where your argument comes in? Valid point.[/quote]
I don’t know where you and Spiff are getting your numbers, but they are, in fact, incorrect. I do know what I’ve paid each time I bought BRK and it bears no resemblance to what you’ve reported. Sorry guys, but you’ve been fed some bad info.[/quote]
You’re correct. You did not buy EXACTLY 10 or 20 years ago. You likely bought when the stock was down, so you have experienced a better rate of return than the 10 or 20 year averages. Hence my statement “Depending on your actual holding period, it could be more or less”. But those actual 10 and 20 year numbers are based on two different sources. If I am wrong, I certainly welcome the correct numbers (as opposed to “they are, in fact, incorrect.”).
I bought my first share in 1996, and paid 26,400 for it. Your numbers are, in fact, incorrect.
You are right, you didn't pay for the OPTION to buy the stock, but had you chosen to excerise your option, you would have PAID for them at a predetermined price set by your company. If the company goes belly-up, what exactly are your options worth? Likewise, at Jones, some are given the optionto buy into LP. That option is free. However, excerising said option will cost you money at an amount set by Jones (or any other partnership). [/quote] That is true Chad,however, when you are offered LP you HAVE to exercise in order to have LP ..... When you are given options you can choose to exercise them whenever you see fit...... That's a big difference.[quote=noggin]As a Jones person who worked for a S & P 500 company before Jones, I can tell you that I recieved stock options and I didn’t pay a dime for them.
You are right, you didn't pay for the OPTION to buy the stock, but had you chosen to excerise your option, you would have PAID for them at a predetermined price set by your company.[/quote] Not necessarily...ever hear of a cashless option exercise?[quote=noggin]As a Jones person who worked for a S & P 500 company before Jones, I can tell you that I recieved stock options and I didn’t pay a dime for them.
[quote=joedabrkr] [quote=munytalks]FOOD FOR THOUGHT:
If I own $30,000 worth of BRK B or any other stock for that matter, I have paid for it and can sell any day the market is open. If I die, my heirs can keep it or sell with a step-up in cost basis. If I am 'offered' $30,000 worth of EDJ LP- it is a DEBT. I OWE Edward Jones $30,000. I cannot sell it anytime I want- nor can my heirs keep it or sell it. AND think about this: If I am 'offered' $30,000 worth of LP and Jones goes belly up- I will still have to PAY the $30,000 to the General Partners- General Partners have EQUITY Partnership in the firm. Limited Partnership is a DEBT TO THE FIRM. You DON'T OWN IT. I would still OWE the General Partners AND I wouldn't have a job anymore. [/quote]As a point of fact ownership of an LP interest is EQUITY. If the LP owner borrows to make the purchase, that is a separate issue entirely.
[/quote] Joe- This topic came up because it was a HUGE point of interest in my Arbitration case. There were two General Partners representing Edward Jones. This is how it was explained - Under Oath- with Penalty of Perjury- and recorded on tape...... "General Partnership is EQUITY OWNERSHIP- Limited Partnership is DEBT OWED TO THE FIRM. When the amount of L P offered is paid for it is merely a PAID DEBT to the firm- which is returned upon certain 'triggering' events. The FIRM has the option of calling in all Un-paid DEBT under certain circumstances." Are the General Partners not correct or were they lying?
…let’s just say that it doesn’t appear there are any CPAs among the general partners…I’ve never heard of a limited partnership interest referred to as debt.
Joe-
If it were an equity, wouldn't one receive the value if it could be redeemed at the market. There isn't one, and in fact Munytalks is right on this one. Indyone says he has never seen a LP interest considered a debt. No the LP Jones offers is offering is a equity if you are hallucinating. The only thing that changes is the income. Before Spiff comes to the GP's rescue, it does pay at least 7.5% and usually higher, but there is absolutely no movement on the value ever for the LP. Think of it this way.... EDJ GP's sold their "income interest" back to Hartford when the revenue sharing disclosures were required two years ago for $70M. Does anyone in their collective right minds think they paid 70M to offer consultative services? Nah...they are too cheap to sell an equity to their reps....but I'll bet they paid pennies (if anything) for that 10% ownership with Hartfornd and when the regulator's noose was getting tight they sold their interest back to Hartford for exactly what they paid for it. Yeah right. Only the reps are stupid enough to buy that crap. Jones LP is a debt in drag.Okay-
THIS may help you guys understand LP versus GP. Get out your INVESTMENT PYRAMID. Get your color markers.... on ONE side of the Pyramid we have LOAN investments... on the other side we have OWN investments...... STOCK/ Mutual Funds that invest in Stock and Variable Annuities are on the OWN side- because when you invest/buy them you OWN a part of the underlying company. CD's/Fixed Annuities and BONDS are on the LOAN side because when you invest/buy one of those you are LENDING the underlying company money.... Now this is taught in KYC class to every new IR/FA - AGREED? GOOD..... IF you don't have the money to BUY a bond outright, but you have agreed to buy that bond.... (ie LIMITED PARTNERSHIP OFFERING) you OWE the underlying company the money you agreed to LEND. YES or NO? STOCK AKA EQUITY is OWNERSHIP...... BONDS AKA DEBT IS LOANERSHIP... You don't own equity in a company when you own a bond.... Remeber from KYC- If you own EQUITY/STOCK in a company and that company does really, really well - YOU do well because you OWN a piece of it. With a DEBT/BOND you are only guarenteed a certain rate of return and hopefully the return of your capital..... You Don't Own Jack Dang Diddly Dong.You are right, you didn't pay for the OPTION to buy the stock, but had you chosen to excerise your option, you would have PAID for them at a predetermined price set by your company.[/quote] Not necessarily...ever hear of a cashless option exercise?[/quote] If you have an option for 100 shares at $5 and the stock is at $10, then you have an equity position of $500. In a cashless option exercise, you may simply walk with 50 shares of $10 (less fees) and not "pay" any cash up front. You can then buy another 50 shares at $10 on your own and have exactly what you would had you simply exercised your option. Point being, you certainly paid for them. They weren't given to you, which is the impression I had from his post.[quote=chaz][quote=noggin]As a Jones person who worked for a S & P 500 company before Jones, I can tell you that I recieved stock options and I didn’t pay a dime for them.
It is debt, but it is debt owed to the LP, NOT debt owed to the firm. It is equity that behaves more like a preferred stock. But you can’t compare it to any other ownership structure, GP, LP, and SLP ALL have mandatory redemption policies. It is callable upon certain triggering events. The only reason the value does not move, is that it is not public or marketable. This is how most private LP’s work. GP shares do not change in value either (except the fact that a certain amount of GP earnings are retained, instead of paid out, so by virtue of this, their shares will increase in value - essentially they are reinvesting dividends at PAR)
Now, GP shares are treated EXACTLY the same for accounting purposes as LP and SLP. All three are considered partnership capital, subject to mandatory redemption. To satisfy SFAS 150, they are all treated as liabilities TO THE PARTNERS, not debts owed to the firm. Bottom line, it is limited partner interest, like many, many other limited partnerships. Call it what you want, but it really is just a very, very high yielding bond (like an average 25% return over the past 30 years). And GP and SLP returns are subordinate to the 7.5% LP guaranteed return. This is contractual, it's in the 10Q's. It's about as good as we are going to get. We can take it or leave it. Hopefully, we can all move on now.And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
It’s still not as good as shares of BRK…no volunteering, no taxes until the sale (and capital gains at that), liquidity, better return and in the end, all one has to do to get it is to pay for it.
I honestly don't know, or care, whether my LP is a debt or equity investment. I can see both sides of the coin. On one side, I loaned my money to the firm in return for a guaranteed interest rate. On the other, I bought into the firm, they guaranteed a specific rate of return, but I have the ability to realize a much greater return than is guaranteed. At the end of the day, it doesn't really matter.
muny - the only thing wrong with your own/loan scenario is that LPs never owe EDJ anything. When you sign the loan paperwork it specifically states that EDJ is not loaning the money. It is a loan agreement between US Bank and the borrower. It's not a loan from EDJ. That would defeat the purpose of using the LP to raise working capital. I might not own Jack Dang Diddly Dong, but as long as what I don't own keeps paying me what it is, I don't care. I'll say it again, the only people I've ever heard complain about the LP are those who don't have any. Philo - My apologies. My numbers were incorrect. I'm going to guess that you bought your share in June of 1996. If that guess is correct, you have posted some outstanding average returns since that original investment. About 13.6% in fact. Not to shabby. In 5 years since 1996 you would have had better returns than the Jones LP. Two of those years were substantially higher (1997 at 34.9% and 1998 at 52.7%). But you've had 5 years that were substantally lower. Two of them in fact were negative (1999 at -19.86% and 2002 at -3.77%). I recalculated the Jones LP return for the same time period. 22.9%. No negative years. Now, you have some flexibility with your BRK A that I don't with my LP. But, please, stop saying that your BRK A has substantially outperformed the Jones LP. Cause you're just plain wrong. BTW, my numbers came from Morningstar. So, if they're wrong, were all screwed.Spiff, my numbers come from taking money out of my pocket and buying the stock. I paid $26,400 for my first share and the current price is in the neighborhood of $143,500 roughly 12 years later. And I haven’t paid a dime in taxes as yet because of it. You can’t make the same claim for your LP.
Therein endeth the lesson.
OK, fine. You win. BRK is better than Jones LP. You are a much better investor than I am. I only hope I can be as smart as you someday.
OK…think about it this way…anyone with the means can buy BRK.
But the Jones LP "bond" is only offered on a discretionary basis..it takes years of hard work and lots of volunteering to even be offered it.. Fact is, most of us on this thread arguing about it, are not LP'sOK, fine. You win. BRK is better than Jones LP. You are a much better investor than I am. I only hope I can be as smart as you someday.
Not likely. Here's a tip, though; Money goes where it's treated best.
[quote=Broker7]OK…think about it this way…anyone with the means can buy BRK.
But the Jones LP "bond" is only offered on a discretionary basis..it takes years of hard work and lots of volunteering to even be offered it.. Fact is, most of us on this thread arguing about it, are not LP's[/quote] You're right. I may be the only one on this particular thread who actually owns any LP. As an owner I have two complaints. One, I can't buy more whenever I want. Two, I can't compound my returns. Neither of those is fixable, so it really is a moot point. But to argue that an investment in Stock XYZ is better than my LP is really an apples to oranges discussion. However, it's a fun little debate.Bingo. I touched on this in my previous post. The tax issue (and lack of reinvestment) kills your return over time in LP. However, buying it on 75% margin improves your IRR. I'm not going to run that, since, well, I just don't care. But suffice it to say that BRK has been a great, very tax-efficient equity investment. And the fact that it doesn't pay a dividend is no big deal since (if you are accumulating instead of spending) Mr. Buffet is reinvesting profits in a much more tax efficient way. Now, if you need those shares for income, it gets a little more dicey. Tough to start liquidating 5 shares of a stock and be efficient about it. LP is a great deal when you are retired and need income.Spiff, my numbers come from taking money out of my pocket and buying the stock. I paid $26,400 for my first share and the current price is in the neighborhood of $143,500 roughly 12 years later. And I haven’t paid a dime in taxes as yet because of it. You can’t make the same claim for your LP.
Therein endeth the lesson.
Bingo. I touched on this in my previous post. The tax issue (and lack of reinvestment) kills your return over time in LP. However, buying it on 75% margin improves your IRR. I'm not going to run that, since, well, I just don't care. But suffice it to say that BRK has been a great, very tax-efficient equity investment. And the fact that it doesn't pay a dividend is no big deal since (if you are accumulating instead of spending) Mr. Buffet is reinvesting profits in a much more tax efficient way. Now, if you need those shares for income, it gets a little more dicey. Tough to start liquidating 5 shares of a stock and be efficient about it. LP is a great deal when you are retired and need income.[/quote] Absolutely correct. However, if the stock is in Mom & Pop's account, living expenses can be taken out, to a degree, as margin loans and a) be repaid with the RMD from the IRA, or b) stock is sold at the death of Mom or Pop and the step up taken. ~Sigh~ I suppose strategies are all out the window when the Dems control both Houses of Congress and the Oval Office.[quote=Philo Kvetch]Spiff, my numbers come from taking money out of my pocket and buying the stock. I paid $26,400 for my first share and the current price is in the neighborhood of $143,500 roughly 12 years later. And I haven’t paid a dime in taxes as yet because of it. You can’t make the same claim for your LP.
Therein endeth the lesson.
[quote=joedabrkr] [quote=Philo Kvetch]
~Sigh~ I suppose strategies are all out the window when the Dems control both Houses of Congress and the Oval Office.[/quote]Now that is a scary issue worthy of some extended discussion on this board, in my opinion. I'd like to know what you(and other wise souls on this board) are doing/considering depending upon how this election goes....or are you not doing anything?
If Billary or Obama wins, we could see some profound changes in our tax structure, and that could affect markets.
Anyone care to start a thread? I'm too lazy....
[/quote] I think this go around, the Dems could send Kermit the Frog to the convention and still win. I think the country is done with Republicans (Bush in particular) for right now. And unfortunately, I think we have to start cashing those low-tax-rate checks. We have been blessed for several years, and taxes can really only go in one direction from here (I suppose). My hope (for the market's sake) is that it is gradual.
I still can’t believe that the choice is going to be McCain vs Hillary or Obama! This is even worse than Carter vs Ford.
Let’s hope for McCain. At least we have a fighting chance that nothing will happen. It would be the best of all worlds.
Except that McCain may move farther to the left and we would see enough votes in Congress to change the tax structure. I I do find it interesting that Joe da broker.... can't find the time to start a thread but has time to comment 4585 times over three years....Maybe Spiff can start it, his numbers aren't far behind! Must have one hellofa recurring revenue book to sustain that much communication. Hey Joe-how about a thread on how YOU conduct business. We could all learn something finally.What does EJ say about the LP and the Pyramid with regard to risk?And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
What does EJ say about the LP and the Pyramid with regard to risk?[/quote] No idea. But by the time you amass a significant enough amount, you probably have a lot of other investments, and it is a small portion of your entire portfolio.[quote=Broker24]And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
What does EJ say about the LP and the Pyramid with regard to risk?[/quote] No idea. But by the time you amass a significant enough amount, you probably have a lot of other investments, and it is a small portion of your entire portfolio.[/quote] This is funny because I remember my RL harping to us about clients that wouldn't diversify their company stock positions because they were in love with their company, while I'm sitting there wondering how he would feel if some newbie investment guy was trying to convince him to unload his GP for diversification, and charge him a 2% rip and reinvestment charge on top of it.[quote=New2EJ&Biz][quote=Broker24]And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
Hi everybody,
I've been with the green machine for two years and I will be leaving the industry and going back to school in January of 2009. However, as the series 7 is my main employable skill, I will probably have to work at a discounter temporarily while I wait for school to start. Will the green machine try to extract training expenses from me, even though I can prove that I am only using my license for temporary employment and that I will leave the industry entirely? I can't think of another job in the mean time that will pay enough to cover the bills. Thank you to anyone who has advice. EDJ1979[quote=edj1979]
Hi everybody,
I’ve been with the green machine for two years and I will be leaving the industry and going back to school in January of 2009. However, as the series 7 is my main employable skill, I will probably have to work at a discounter temporarily while I wait for school to start.
Will the green machine try to extract training expenses from me, even though I can prove that I am only using my license for temporary employment and that I will leave the industry entirely? I can’t think of another job in the mean time that will pay enough to cover the bills.
Thank you to anyone who has advice.
EDJ1979[/quote]
You’re probably fine.
[quote=Broker24][quote=New2EJ&Biz][quote=Broker24]And incidentally, if I were to put this on the “pyramid”, I would classify it as “aggressive income”. Although with a solid 30 year track record, and no return less than 15% during those 30 years, it’s a pretty solid investment for part of one’s income portfolio.
What does EJ say about the LP and the Pyramid with regard to risk?[/quote]
No idea. But by the time you amass a significant enough amount, you probably have a lot of other investments, and it is a small portion of your entire portfolio.[/quote]
This is funny because I remember my RL harping to us about clients that wouldn’t diversify their company stock positions because they were in love with their company, while I’m sitting there wondering how he would feel if some newbie investment guy was trying to convince him to unload his GP for diversification, and charge him a 2% rip and reinvestment charge on top of it.
[/quote]
I would suspect that anyone that is in a RL and GP role already has a substantial portfolio, so diversification is probably not an issue.
Tell that to a new Jones guy when they bring in a client that is high net worth. Even if the client had 5% in a company stock they’d do all they could to get the client to unload it.
Tell that to a new Jones guy when they bring in a client that is high net worth. Even if the client had 5% in a company stock they’d do all they could to get the client to unload it.
Sorry, my point was that the RL/GP probably has a large enough portfolio OTHER than GP shares, that diversification is not an issue. And by that point, they are probably educated well enough to understand the risk they are taking. It's really a moot point.
I understood you the first time. My point was a slam at Jones IRs (especially newbies-but not exclusively) that blindly try and get clients to sell company stock because they've been brainwashed to believe there are NO circumstances where someone should own company stock (regardless of percentage of net worth and tax considerations). Unfortunately it is a side effect of the commission driven environment of Jones that the advisor can only get paid on those dollars if they convince the client to sell. I hope the advisory fee system Jones creates allows the advisor to get paid on in-kind stock deposits to eliminate that conflict.[quote=CIBforeveryone] Tell that to a new Jones guy when they bring in a client that is high net worth. Even if the client had 5% in a company stock they’d do all they could to get the client to unload it.[/quote]
Sorry, my point was that the RL/GP probably has a large enough portfolio OTHER than GP shares, that diversification is not an issue. And by that point, they are probably educated well enough to understand the risk they are taking. It’s really a moot point.
Sorry CIB one of my buddies still at Jones says no individual stocks will be allowed in the Advisory program. But who knows maybe he’s wrong or they’ll change their mind.
I understood you the first time. My point was a slam at Jones IRs (especially newbies-but not exclusively) that blindly try and get clients to sell company stock because they've been brainwashed to believe there are NO circumstances where someone should own company stock (regardless of percentage of net worth and tax considerations). Unfortunately it is a side effect of the commission driven environment of Jones that the advisor can only get paid on those dollars if they convince the client to sell. I hope the advisory fee system Jones creates allows the advisor to get paid on in-kind stock deposits to eliminate that conflict. [/quote] CIB, not sure where you get your info. I have never heard this before. Yes, if someone had 90% of their net worth in company stock, that seems a little absurd, but most of my clients have some level of company stock, which is perfectly acceptable. In fact, this is often a good thing as far as tax planning is concerned. I have used NUA on several occassions, and we have been able to start drawing down on company stock at cap gains rates vs. taking IRA withdrawals (there are several large employers in my area that match in company stock and give RS). I think you are making some rather grand assumptions about that "evil" commission system, and Jones in general. FYI, last time I checked, Jones is not the only firm that uses commissions, and Jones is also not the only firm with advisors that do stupid things for a buck (go back through some of your ACAT's in and review some of the crap that comes over from some "elite" wirehouses - it's not about the firm, it's about the advisor).[quote=Broker24] [quote=CIBforeveryone] Tell that to a new Jones guy when they bring in a client that is high net worth. Even if the client had 5% in a company stock they’d do all they could to get the client to unload it.[/quote]
Sorry, my point was that the RL/GP probably has a large enough portfolio OTHER than GP shares, that diversification is not an issue. And by that point, they are probably educated well enough to understand the risk they are taking. It’s really a moot point.
I too must have missed that particular brainwashing class. Which suprises me, since I used to teach those classes in my former Jones life.
I've had some clients move LARGE stock positions into their Jones accounts and we did have a discussion about owning too much of one thing. It had nothing to do with commissions, rather the risk you take owning having an overconcentration in one stock. Your old company or not, it's too much risk. My dad is a perfect example. He worked for a publicly traded company for 30+ years. Put every dime of his 401K money into company stock. Retired in 1999 with the stock at $55. The evil EDJ broker that I sent him to sold almost all of those shares totaling $566K. I'm POSITIVE she did it ONLY for the commissions. Evil woman! So, let's see what would have happened to dear ol' Dad if that evil woman wouldn't have sold it, instead just transferring in kind. Well, 12 months later that same stock was trading in the mid 20's. Hmmm...seems that evil woman who had been brainwashed by EDJ to sell those shares only for the commission, did my dad a huge favor. She bought him some horrible long bonds that are still paying him over 7%. She bought him some good funds (at NAV) that have done very well. She made sure he was balanced and ready for an eventual downturn in the market. All because EDJ brainwashed her into believing that there are "NO circumstances where someone should own company stock (regardless of percentage of net worth and tax considerations)". A slam back at you CIB, if you AREN'T having those discussions with your clients, instead just simply transferring in that money to a fee based account so you can "get paid on in-kind stock deposits to eliminate that conflict", then I think you are doing your clients a disservice and should revisit your EDJ roots so you can give your clients some good solid advice.Oh how I had to take up for Jones, but when I was at Jones they had CE classes on NUA and they produced a CPA guide on NUA—they even funded several of my client’s non-qualifed stock options so the client would not have to sell them out right away. So Spiff and Broker24, put that in your book–so yes while I was at Jones they encouraged me to do NUA’s and I did several!
It's actually a great concept, though difficult to use (i.e. finding the client with large amounts of highly appreciated company stock, that has a cost basis (some companies don't provide cost on these), and is willing to take some tax hit today for a large benefit tomorrow). BUT, most inexperienced advisors are not trained to look for these opportunities, thus very few advisors are talking to their clients about it.Oh how I had to take up for Jones, but when I was at Jones they had CE classes on NUA and they produced a CPA guide on NUA—they even funded several of my client’s non-qualifed stock options so the client would not have to sell them out right away. So Spiff and Broker24, put that in your book–so yes while I was at Jones they encouraged me to do NUA’s and I did several!
I agree with Broker24, too many FA’s at all firms don’t use this enough–sometimes an FA sees the difference between a couple of hundred$ on a NUA down the road and several thousand$ now in commission or fees…I would like to think that if you are knowledgeable on NUA’s you would explain them to your client and use them or some of them if it is in there best interest. I have used NUA at LPL too!
[quote=Spaceman Spiff]I too must have missed that particular brainwashing class. Which suprises me, since I used to teach those classes in my former Jones life.
I've had some clients move LARGE stock positions into their Jones accounts and we did have a discussion about owning too much of one thing. It had nothing to do with commissions, rather the risk you take owning having an overconcentration in one stock. Your old company or not, it's too much risk. My dad is a perfect example. He worked for a publicly traded company for 30+ years. Put every dime of his 401K money into company stock. Retired in 1999 with the stock at $55. The evil EDJ broker that I sent him to sold almost all of those shares totaling $566K. I'm POSITIVE she did it ONLY for the commissions. Evil woman! So, let's see what would have happened to dear ol' Dad if that evil woman wouldn't have sold it, instead just transferring in kind. Well, 12 months later that same stock was trading in the mid 20's. Hmmm...seems that evil woman who had been brainwashed by EDJ to sell those shares only for the commission, did my dad a huge favor. She bought him some horrible long bonds that are still paying him over 7%. She bought him some good funds (at NAV) that have done very well. She made sure he was balanced and ready for an eventual downturn in the market. All because EDJ brainwashed her into believing that there are "NO circumstances where someone should own company stock (regardless of percentage of net worth and tax considerations)". A slam back at you CIB, if you AREN'T having those discussions with your clients, instead just simply transferring in that money to a fee based account so you can "get paid on in-kind stock deposits to eliminate that conflict", then I think you are doing your clients a disservice and should revisit your EDJ roots so you can give your clients some good solid advice. [/quote] I spent well over 5 years with the machine, and stand behind what I say. I would not doubt this is another one of those regional cultural issues. I would venture to say that if you discussed NUA with 90-95% of my former region they would not understand it for a minute. I also sat with two EJ guys after I left and one of them was fawning about a new client with a bunch of stock coming in...the 20 year vet said "hopefully you'll get to sell and reinvest it." I do not doubt for a minute there are advisors out there doing the right thing, but from my experience there was a culture in my region of doing all we could to eliminate individual stock positions. (I think the RL had a lot to do with this culture looking back and reflecting on what you both had to say). I will end with this-There is a completely different tone to the conversation with my clients that are holding large individual stock positions that are paying me an advisory fee compared with those that held stocks at EJ. I can make a recommendation, yet leave the choice up to them with confidence that it won't effect my bottom line in the short term, and they can make their decision knowing the same thing .[quote=CIBforeveryone] I would not doubt this is another one of those regional cultural issues. I would venture to say that if you discussed NUA with 90-95% of my former region they would not understand it for a minute. I also sat with two EJ guys after I left and one of them was fawning about a new client with a bunch of stock coming in…the 20 year vet said “hopefully you’ll get to sell and reinvest it.”
I do not doubt for a minute there are advisors out there doing the right thing, but from my experience there was a culture in my region of doing all we could to eliminate individual stock positions. (I think the RL had a lot to do with this culture looking back and reflecting on what you both had to say). [/quote] I was just having this conversation the other day with a veteran. He was telling me that there is one particular region he knows of that he calls a "bunch of criminals". And this guy's a big producer, been around a while. He said there is a culture in the region that promotes commissions and production at any cost (to the client). It is just vastly different from my perspective (my region). But it was an eye-opener for me.[quote=Broker24]
I was just having this conversation the other day with a veteran. He was telling me that there is one particular region he knows of that he calls a "bunch of criminals". And this guy's a big producer, been around a while. He said there is a culture in the region that promotes commissions and production at any cost (to the client). It is just vastly different from my perspective (my region). But it was an eye-opener for me.[/quote] Ok, I've got SWAT, FINRA, FBI, & the Justice Department standing-by. If you'll PM me the region, I'll arrange for EDJ to hold a mandatory meeting for that region. Then we'll surround the place, go in and book'em all, just like the ending of the movie, "Boiler Room". Imagine the "Goodknight" opportunities...[quote=doberman] [quote=Broker24]
I was just having this conversation the other day with a veteran. He was telling me that there is one particular region he knows of that he calls a “bunch of criminals”. And this guy’s a big producer, been around a while. He said there is a culture in the region that promotes commissions and production at any cost (to the client). It is just vastly different from my perspective (my region). But it was an eye-opener for me.[/quote]
Ok, I’ve got SWAT, FINRA, FBI, & the Justice Department standing-by. If you’ll PM me the region, I’ll arrange for EDJ to hold a mandatory meeting for that region. Then we’ll surround the place, go in and book’em all, just like the ending of the movie, “Boiler Room”.
Imagine the “Goodknight” opportunities… [/quote]
From what I hear, some of those guys were already there, and the open offices spoken for (probably a GP’s kid )
Funny how an RIA has so little need for a form called “liquidate and transfer”. Jones FAs have TWO conflicts of interest here: one, bring in CASH only to avoid compliance (Jones never asks where it came from); two, bring in CASH to get paid. I know, I know: occasionally leave a few funds “in kind” so it looks good, but…
If I liquidate a fund before I transfer it, normally I do it in non qualified accounts. The only reason I do this is because I know that it will be easier for the client at tax time to have the company with all the cost basis info do the liquidation. The only reason I liquidate the fund at all is if there is another fund that I normally use, follow, and understand that has performed better. I understand that there are some folks out there that liquidate everything before brining it into Jones. But, I'll be that's not specific to Jones. I'll bet any firm that has a commission based model has that going on.
So RIAs don't have their favorite fund families? You leave every dollar exactly where you found it? You never move money from say Pioneer to DFA or to some other family that you know and trust? Then why do they pay you (BTW, drastically more using the fee based model over the long term than your typical A share buyer)?Maybe if Jones would transfer cost basis on accounts that leave, maybe they would get cost basis on accounts that come in!!!
Now that is a sore subject. What a pain in arse it is for both clients and us to try and get info out of Jones. They don't make it easy by design.
Client always come first was the General Partners montra. Or is it? Hey Spiff...Be careful about dissing the costs of fee based. Rumors are you'll have it at the regionals. Oh boy. Now you get to change your tune again because your company finally has seen the light. "Without a doubt, the best sales force in the world." Doug Hill, former head of the Green MachineMany firms transfer cost basis electronically, if the receiving firm has the technology to receive it. LPL does…I know that for a fact.
I understood completely that my comment would probably be met a response like yours. I'm looking forward to the fee based model. And I'll use it. But only after the client understand the options he has available to him. There has to be a benefit to for paying a fee. It IS cheaper to buy and hold A shares. You can't argue with that. Perhaps it was the implied I'm better than you are because I'm an RIA that I took offense to with newnew's comments.
I wish that Jones would figure out a way to transfer cost basis info from other firms. Maybe they're just too cheap to pay for the system to do it. Who knows. It would definitely make my life easier. And I wouldn't have to use all those liquidate and transfer forms!Spiff-just for some conversation, where do you see “flexibilty” fitting into client needs? I KNOW A shares are cheaper if you buy & hold for infinity (exaggeration.) But how many of your clients do you think will actually follow through with that scenario. Assets move all the time, each time for a better long term reason. Problem is, clients rarely follow through and “do nothing.”
Part of the value a client gets is that we do not need to liquidate their funds to get compensated, and in fact can make that decision/recommendation based on timing/circumstances/or other.
Your example is a great reason I became a believer on advisory fees. I am 100% convinced that there are cases where you may have been forced to liquidate the account for the reasons you mentioned (which are valid) immediately, while I can do the same process, but do so over the course of a year or two for tax reasons. If you amortize out the long term "cost" of the tax implications v. the benefit of delaying them, much of that extra .75%/year (minus the up-front commission) is offset. One client has a few of these situations over their relationship with me, in hard dollars alone much of that cost differential is offset. This is in addition to other benefits as I see it. The big question on the Jones advisory fee platform will be this...can the advisor move existing funds and stocks into it? If no, then Jones is eliminating many of the reasons it makes sense from day one. (And probably opening themselves up to further "revenue sharing" type legal consequences of limitations placed on their advisors/clients).CIB-
You can't be putting forth that the GP's might be interested in THEIR INCOME. Oh Spiff, can't you come up with a reasonable explanation as to why the GP's would want to put their precious revenue sharing scheme (I mean program, I know everyone does it) at risk. We are waiting for the brillance.This question has little to do with revenue sharing. You’re going to argue with me, I know. So be it.
As far as Jones letting other funds into the mix, my guess is no. Just my guess. It's been talked about as a great place for new dollars, like 401K rollovers, but not for existing assets. For the record, I agree that it would be a tremendous benefit to be able to bring any investments into the platform. I'm guessing that we'll get there eventually, but not upfront. I can only speak as to what I do in my office as far as liquidating funds. My preference would be to liquidate everything that is not something that I normally use and buy what I know. However, if in researching the funds it makes sense to hold, I do. I don't like it because I don't get paid on it, but I do it. It's what's right for the client and AUM for me. We talk about the tax issues involved with selling. If it makes sense and the client agrees we sell now. If it would be better to split it over a couple of years like you mentioned, we do that. horse - I have found A shares to be as flexible as my clients need them to be. My goal is to set up a quality portfolio upfront and make minor adjustments along the way. Sometimes it involves moving from one fund family to another, but only if there is a better opportunity in that space elsewhere and I can justify (to myself, the client, and FSD) that it makes sense. Right now, I'd love to move a chunk of money into Oppenheimer's Intl Bond fund, but for my American and Franklin families I have to weigh out if it makes sense to stick with their funds or move to Oppy. It's a discussion to have with the clients. Some will probably move, some will stick with American and Franklin's funds, even though their performance hasn't been as good as Oppy's. I do see the value in being able to call them and just tell them we're going to move some money from fund A to fund B. No cost above the annual fee. But for some of my clients it might not make sense.Spiffy-
I'll bite again.... Are you insinuating that revenue sharing has nothing to do with the new platform? You really are ready to be a GP. You think what you are saying is intelligent and thought out. Nothing could be further from reality. The only way that revenue sharing isn't part of the GP's conversation, is if they have figured out a way to make as much, or probably more somewhere else. So far, they haven't. But Weddle is the brightest mind they have, so if it is to happen it would be logical under his watch. I am sure Spiff will have a spin (have you considered politics or a stint on the GRASS roots task force ). Try engaging in truthful dialogue for a moment. I realize it may be hard to think for yourself but just go ahead and give it a try...My RL said her sources told her that no loads and ETFs w also. Finally. They finally realize that recurring revenue is MORE profitable–the new 5 year plan even tracks the projected (large) growth of recurring fee revenue. Better late than never; better late than launched poorly.
Ice - I fixed it. Fire away.
foot - I didn' t insinuate that at all. From an LP standpoint I hope revenue sharing IS a part of the decision. I'm sure we'll still get revenue sharing from the preferred funds, maybe even from some others that get included in the platform. But there will be some no load funds and ETFs in the mix that probably won't. When I said that they wouldn't let other funds in, I meant that if it wasn't a fund currently in the list of funds cleared for use in the platform, they probably won't let them transfer in. Like a fund that I can't hold in firm name just simply can't be moved into my office. I'm not trying to spin anything any more than you are. We're just trying to spin the opposite way. I agree with newnew that Jones has finally realized that recurring revenue is more profitable in the long run. The math is pretty simple. Take an office that has $30 mil in fee based accounts. If the gross is 1% that's a $300k producer. In a commission based environment that producer is probably $220K-250K at best. And there's a lot more stress on that FA to perform. An additional $10 mil in AUM changes the fee based producer's lifestyle. $10 mil in a commission based office changes that FA's AUM, but not his lifestyle.It’s a business. All revenue streams are considered. Personally, I think they will capture MORE revenue over time than they do with revenue sharing, since they are getting a larger ongoing fee, and they are getting it from more than just preferred funds (yes, some non-preferred funds are included, as well as some ETF’s). At the end of the day, it is a huge improvement for the advisors, clients, and firm. It also makes sense to further diversify their revenue stream (since it mostly comes from A-shares and some stock & bond commissions).
exactly
[quote=Spaceman Spiff]
I understood completely that my comment would probably be met a response like yours. I'm looking forward to the fee based model. And I'll use it. But only after the client understand the options he has available to him. There has to be a benefit to for paying a fee. It IS cheaper to buy and hold A shares. You can't argue with that. Perhaps it was the implied I'm better than you are because I'm an RIA that I took offense to with newnew's comments.
I wish that Jones would figure out a way to transfer cost basis info from other firms. Maybe they're just too cheap to pay for the system to do it. Who knows. It would definitely make my life easier. And I wouldn't have to use all those liquidate and transfer forms! [/quote] Run FKINX versus FCISX over last few years. How many years is breakeven on a 50K ticket? BTW, if you haven't already figured it out when you have a fairly low expense ratio fund and unless you hit a major breakpoint i.e. 100K typically the client has a breakeven for 5-8 years depending on the fund. Run your favorites A versus C at less than 100K BP's and find out the breakeven's and then say that it is cheaper to buy and hold A shares........ Shouldn't a client make that decision?[quote=noggin][quote=Spaceman Spiff]
I understood completely that my comment would probably be met a response like yours. I'm looking forward to the fee based model. And I'll use it. But only after the client understand the options he has available to him. There has to be a benefit to for paying a fee. It IS cheaper to buy and hold A shares. You can't argue with that. Perhaps it was the implied I'm better than you are because I'm an RIA that I took offense to with newnew's comments.
I wish that Jones would figure out a way to transfer cost basis info from other firms. Maybe they're just too cheap to pay for the system to do it. Who knows. It would definitely make my life easier. And I wouldn't have to use all those liquidate and transfer forms! [/quote] Run FKINX versus FCISX over last few years. How many years is breakeven on a 50K ticket? BTW, if you haven't already figured it out when you have a fairly low expense ratio fund and unless you hit a major breakpoint i.e. 100K typically the client has a breakeven for 5-8 years depending on the fund. Run your favorites A versus C at less than 100K BP's and find out the breakeven's and then say that it is cheaper to buy and hold A shares........ Shouldn't a client make that decision?[/quote] Part of it is also emotional/mental. Someone starts DCA'ing in to an IRA, and you are going to charge them 5.75% plus the $40 IRA fee, that's a big bite. It hurts much less, and feels better to use C shares for small amounts (under 100K). It will keep you on track, rather than the client getting discouraged because of the commissions.I’m not disagreeing with you about C shares on smaller amounts of money. They make a lot of sense if you think you are going to be making radical changes in a portfolio periodically. But typically, in my office, when we sit down with clients we are talking about long term, beyond 5-7 years.
I ran CWGIX against it's B and C share components (conveniently you used FT who doesn't sell B shares) and was not suprised at the results. You are correct that breakeven on a C vs A share is somewhere around 8 years. But on a B vs C it's only 4 years. There's a 5 bps difference on the fees on the B vs C. At 10 years the A share is obviously better than either the B or the C. I only ran it at $10k, so there was a full load. Had I run it at $50K the breakpoint would have made a big difference. Now, am I saying that every client is going to stick with CWGIX for 10 years? Probably not. But when we sit down, I tell them we're going to stick with American Funds for a long time.Spacey-
You may talk 5-7 or a long time with your clients (I know you haven't been around that long) but realistically do your clients really buy it or do you think they are different than the average. This is the part that make me think you are a rookie at Jones. No one with half a brain would actually state that their clients are different than the national average. You and your cohorts buy the 10 year hold but somehow you are never around long enough to see it. I think you should start a new program at Jones called FAKE IT TILL YOU MAKE IT. The bottom line is anything the clients wants you should have available. And just because you justify A shares doesn't mean that they are right or appropriate for everyone. Dude, its all you have in your box of tricks for now, and the GP's choose how big a sand box you get to play in.[quote=Spaceman Spiff]I’m not disagreeing with you about C shares on smaller amounts of money. They make a lot of sense if you think you are going to be making radical changes in a portfolio periodically. But typically, in my office, when we sit down with clients we are talking about long term, beyond 5-7 years.
I ran CWGIX against it's B and C share components (conveniently you used FT who doesn't sell B shares) and was not suprised at the results. You are correct that breakeven on a C vs A share is somewhere around 8 years. But on a B vs C it's only 4 years. There's a 5 bps difference on the fees on the B vs C. At 10 years the A share is obviously better than either the B or the C. I only ran it at $10k, so there was a full load. Had I run it at $50K the breakpoint would have made a big difference. Now, am I saying that every client is going to stick with CWGIX for 10 years? Probably not. But when we sit down, I tell them we're going to stick with American Funds for a long time. [/quote] How many Putnam accounts have you switched in the office you took over? I will bet that when the broker put them in to Putnam he thought the same thing you did, namely long term investment and we are going to stick with putnam for a long time....... C shares in American convert to F shares at yr 10, therefore not much cost difference given the added flexibility. Wow, CWGIX has been around 14 years or so and you are already projecting 10 years into the future, my man....... BTW, I don't use B shares..... If you use another fund other than CWGIX your numbers look a lot different, you probably know that and that's why you used it. Good luck to you and I hope you will keep an open mind, all knowledge does not flow from St Louis.....Spiff- Sorry you took offense at my attitude; I guess my point was more this: of course RIAs liquidate to “favorites” that they follow, but always AFTER the transfer. There is nothing to hide, and cost basis has nothing to do with it. For commission based accts, and Jones compliance is all I know, it is important to bring in cash. Also, you are not right that fee-only is always more. (ETF cost plus 1.4% RIA fee = Ashare cost plus trading costs plus load?)
I don’t have to liquidate anything before I bring it in. Yes, cash cuts out FSD, but I don’t really care about having to answer to them. If it is a taxable account and we are liquidating anyway, I would prefer to have the client liquidate the money at the firm who actually has the cost basis. Client’s are typically horrible record keepers and trying to recreate cost basis from statements is a pain. I’m not trying to hide anything from anyone. By the time we transfer assets in the client and I have had a lengthy discussion about what to keep or sell, what’s going to happen, fees, etc.
You are correct. I have an uncle who has a Fidelity broker who charges him .75% a year for his stock and bond accounts. No funds, no ETFs. I can't compete with that with funds or my MAP account. Neither can you with your 1.4% RIA fee. But, when you are talking about a fee based fund portfolio, which is what I typically see, then yes it is. foot - have you not paid attention to all of the posts I put out there in the past about my resume with Jones? I've got my little pin with two diamonds in it. If I just counted my years in the field, my pin would only have one diamond on it. And, yes, I'm going to say my clients are going to hold their funds longer than the national average. And I'll bet Broker24's will and Miss Jones' will and the rest of us who are with Jones will too. I've seen the statistics on how long our average fund is held. And it's way above the national average. But, I'll bet that most brokerage firms can say the same thing. The no load companies bring that average way down. noggin - The office I took over didn't have much Putnam in it. And yes, I switched some people out of Putnam into other fund families. But it's not a normal circumstance for a fund family to go through the issues like Putnam had. And yes, I'm sure when the FA sold those Putnam funds in the late 90's he figured they would be just fine like they always were before. I did the same thing with some of the Federated funds that were on the books. I think I might have left Kaufman alone. Ask me how many American, or Van Kampen, or Lord Abbett accounts I switched. We take gains, we rebalance, we will sell individual funds that are underperforming, but that's my job. I used CWGIX because it is the #1 fund in my book. I ran the same thing on Affiliated, Comstock, GS Growth and Income, and Kaufman. All of them turned out the same. Over a 10 year period it is ALWAYS better to own A shares. B shares ALWAYS came out second best, followed VERY closely by C shares. But still, C shares ALWAYS came in last. It's all just simple math. C shares have higher expenses than B. B shares have higher expenses than A. I'm not projecting anything into the future. I'm simply stating that if we hold Fund A vs Fund B or Fund C for more than 7-8 years, no matter what kind of money it is, A shares will be cheaper and therefore put more money in their retirement funds.When I was at Jones I heard NUMEROUS times our that “clients hold their funds an average of 16.something years.” They still say the same thing?
My personal opinion on this "hold so many years" of any investment is..well...worthless. Hell if thats the answer...why would I, as an investor, need to deal with Spiffy? Hell, I could go on any finance website and look at the long term track record of funds from Fidelity, Vanguard, American, Franklin, Dodge and Cox..etc...and hold those forever. Why do I need a company like Jones? I don't care if I buy an A share or b or c....why should I pay anything to a company that says buy and hold ICA forever. Why do you deserve 1 dime of my money, or TRAILS forever...THe reason for the buy and forget, unless I need to make a commission, is because of 1. Revenue sharing, 2. Trails....Jones as a company makes a ton of these...so they can say buy and hold...buy and hold...what would happen if the SEC said revenue sharing is banned and 12b-1 fees are banned....what would your average investor hold time be then.....hmmmmmmm
Spears. Mr. Spiffy (now referred as 1 or 2 carats) will fight until his death at Jones that he is not diriven by revenue sharing.
What he conveniently chooses to ignore is that he takes orders from those that don't think like him...Do you know who the #1 mutual fund seller is in the industry? It's not Jones. It's Merrill Lynch. They have over 100 fund families that their FAs can use. ALL of them are required to pay revenue sharing. If they don't, MER doesn't use them.
Jones gets revenue sharing from 8 families. They could ask for revenue sharing from all of the families our FAs are able to sell, which currently stands at 75. All of them would agree. The difference between Jones and MER? MER expects everyone to pay them. Jones doesn't want everyone to pay them, just the companies they think are the best. Ice - well said.My point was…“The average jones client holds funds for 233.5 years”…but the real reason they push this is BECAUSE of revenue sharing and 12b-1 fees…like I asked…if revenue sharing was banned and 12b-1 fees are banned…what would the hold time be for the Jones brokers…as 1 vet told me"go through your book…see if theres funds that were sold more than 3 years ago and move them to something else"…very different than our investors hold funds for 16 years on average…I think that number is actually a bullshit number someone from the mothership threw out there…Bspears investment clients hold there mutual funds for 17 years…
That vet was a moron. I’ll bet his FSD had him on speed dial.
What matters is choice. At Jones your choices are limited to the families that pay them the most. How else did Jones justify back in 1996 the inclusion of Hartford (a fund family with no track record)? Spiff’s spin about ML compared to Jones is another example of twisting the numbers to fit. The percentage of net profit generated from revenue sharing is far greater than ML.
Maybe you heard that the largest brokerage firm has its hands in many profit centers. At Jones the management chooses (notice Mr. Spiff) to collect I believe close to 30% of its net profit through the back door arrangements. Spears is right on the money on this one. Spiffy before you retort back YOUR clients are different. YOUR hold periods are different and revenue sharing doesn't matter to YOU. I would like to paraphrase for the great Doug Hill who said, " You are part of the greatest SALESFORCE IN THE WORLD." Have a great weekend...Sure does feel like 2005 again and 2006 and 2007. Do you guys ever get tried of hashing over the same argument every 3 months?
No. What else would we do on a Friday afternoon if it’s too cold to golf?
Spiff-
Saw your response on the other thread. Flip flop. You are ready to be a GP.For the year ended Dec. 31, 2007, Edward Jones received approximately $125 million in revenue sharing payments from the preferred fund families as designated throughout 2007. For that same period, Edward Jones’ net income was $508 million.
[quote=footsoldier]Spiff-
Saw your response on the other thread. Flip flop. You are ready to be a GP.[/quote] Not a flip flop. This thread was talking about the difference between A, B, and C shares. I am an A share fan. I've seen the reports run enough times to know that for the majority of people who don't want to use fee based models, they make the most sense. The other thread is talking about fee based. I'm looking forward to fee based biz. I've got clients who don't want to do more A share biz with me, but would consider a fee based account. They like my advice and my style, but just don't want to do A shares for some reason. I've given up trying to convince them that A shares are better. Now I'm just waiting for the opportunity to tell them about the fee based accounts.Hi there, I left Edward Jones 8 days ago. I moved to Raymond James. I had gross of $365,000.00 in 2007. I have worked for Jones for 6 years as a licenced FA. I have no limited partnership and although I do win the trips they are a taxable benefit and believe me the tax is not inconsequential. I have done about 3 months volunteer service in EJ in those 6 years. I have now joined Raymond James. I received a substantial transition and bonus payout. I own my own book now but didn’t before I left. It is worth around $500,000.00 to sell at its current value. The payout on the independent platform is 85%. Sue I have costs but I am sharing them with another FA that left with me. By my calculations my net payout will be about 70%. Twice the payout I was receiving at Edward Jones. Add that all up and it was a million dollar move for me. I am staggered that more FAs haven’t seen the light. I am sure that increasingly many will. Alan AKA Wombat
Wombat good info, agree your move will be good and it will only get better. What kind of package did RJ give? That’s news to me. In the past it was a small amount of money, like 2% of trailing 12 gross.
Well, R.J. has recent;y upped the ante in terms of their transition and bonus awarded on signing. If you move on your own it is based on 50% of 12 months trailing gross commission. However because 2 of us negotiated with RJ ad moved together we received 70% of our individual 12 month trailing coms. For me that worked out to $255,000.00 (Happy birthday to me) If we had a third one that took us collectively over $1 mill gross it would be 100% for each of us based on our respective 12 month trailing. We have the opportunity to up it to 100% if we find that 3rd person within a year. I am not saying everyone gets that, that's what we negotiated. The good thing about the payout is that it is all received over the first 4 months(ie 25% per month) However, because there is an offsetting loan against it, tax is only applied each year on 20% so you get a 100% tax free for a year, 80% tax free for the 2nd year etc. You should look into it if you are not happy with the payout at your current company. Hope this helps. Wombat.
Wombat,
Are you saying that instead of the old 2% to help out with transition costs, RJ has started a program on the independent side that rivals that of some deals you see at wires? AND you are not an employee but self employed, with the high payout? If true, this is a huge development.... Never before have I seen this kind of deal on the indy side. TossAgain..do we need more proof of the churn and burn at the Green monster. Old client brings in his statements from EDJ's. The new kid in my old office sold him and his wife out of Lord Abbott A shares and purchased Capital Income builder A share, 3.5% (In 2 roths and a Jt acct) commish..."Lord Abbott is a terrible fund company"...Look at the historical returns from CIB...The ACAT paperwork is on the way....Suffice to say this big union dude is going to rip this guys ass.....Should I give him a courtesy call...Spiff where is this wonderful compliance you say your screwed up company has....THis kid is new..been out..maybe 3-4 months....THE BEST TRAINING IN THE INDUSTRY...what a fraud the green machine is...
Drapala…the vet probably learned that trick on one of those great diversification trips…you know…networking with other Jones reps and finding out how to rape their customers…One of the guys in my old region said on his first diversification trip he had a vet tell him to call and he would show him the “trick” to always winning the contest…hmmm …wonder if this wasn’t the same guy…
All IRA transfers to a bond fund first, all taxable cash to a muni fund first...check on tax free income and taxable income. Growth & Income and Growth were always easy with mutual fund trades. Oh, and if it's the last month and you are a category short, call the RL and have him change one of the Growth Leader's hires to you to knock out that category. If you are in good favor you will get it. If you aren't, you won't, so tell everyone "I decided to take the cash" if it doesn't work out and you don't make the trip! CIBDrapala…the vet probably learned that trick on one of those great diversification trips…you know…networking with other Jones reps and finding out how to rape their customers…One of the guys in my old region said on his first diversification trip he had a vet tell him to call and he would show him the “trick” to always winning the contest…hmmm …wonder if this wasn’t the same guy…
Maybe we need to put together the “REAL” Jones handbook…the underbelly of what is really going on inside the cult. The Top 10 Things You Need To Know To Be A Top Producer At A Cult…I love the new speak…“I just got my payout sheet and its says I made about 55% on my production”…Another blowhard way to keep the Reps from leaving…Another great thing about Jones…I was paying north of 700$ per month on Health Insurance. I know pay 322$, and hell, I’m not even in a group plan. What a ripoff…
I pay $360 a month for my health care through Jones (family of four). I have an HSA that allows me to contribute money pretax for health care costs that my insurance plan won’t cover. I still think it’s too expensive. If you are going to use an example, you should at least know if you are correct before using it.
My payout was in the 50% range too, and I don't have a $100 mil book and the bonus that goes along with it like rank does. What was the LA fund that you sold the client and then the new FA liquidated? Cause there are a lot of LA funds that I sold 3-4 years ago that I'd love to switch right now. Performance has been less than stellar recently. The annuity situation that DRAPALA mentioned is a formal complaint letter waiting to happen. Those things shouldn't go on at Jones, or anywhere else for that matter. You are right on both comments. Compliance should have never let it go through and he was acting greedy. Why don't you have the client call EDJ and file a formal complaint? CIB - no need for the muni idea anymore. If an FA does any annuity biz to speak of, he'll blow tax free income out of the water. All allocations to bonds in annuities count as tax free income now. I hit something like 225% of my target on that one last contest period. That category has always been the most difficult for most guys to fill.Couldn’t you find a fund within LA to NAV to …or would that be to hard to do…or maybe you know you need to keep above the performing line. The big problem had to do with the jt acct having tax gains…if your new and just peforming a sales job…I guess you don’t worry about causing tax problems. The whole time he’s doing this…“wow, this job is easy, I’ll just go through my book and move to different funds”…as I’ve said before …the new people jump into an office and churn and burn without prospecting…depending how big or small the office is, this lasts only a few months. Then the pipeline of new clients, assets have dried up, and the dude starts going…wow this is tough, nobody wants to talk to me…nobody wants to buy my 35 year bonds paying 5% or let me review their statements from Merril, SB, Morgan, AG/Wach, LPL, RayJay. Doubt lingers into his mind, he starts saying the markets are causing his production to suffer, to much competition, nobody has any money…blah blah blah…and THEN he leaves…and then a new person comes in and the cycle starts allover…but you know Ed Jones doesn’t care because they’re getting the upfront A share fee everytime…ROll on…Has the “our clients hold mf’s for 18 years” changed or do they still spew that out of the dirty Mississippi River…
You avoided the question with another rant. How about answering it. What LA fund was it?
Affiliated and bond debenture…anymore questions…trying to justify your churn and burn company…
Looking at my JT acct…we own 106k of Affiliated and 18k of bond debenture…I guess I should be moving…I should call this joker and see what he recommends…
So…comeon now Spiff…how many hypos do you have to run to justify the joker in churn and burning MY client…
Not that many. It wouldn’t be all that hard. I’m not a fan of Affiliated. It’s just an average fund. Even for your own money you could do better. In just the last 12 months CAIBX has outperformed LAFFX by a large margin. Last three years wouldn’t have even been close. LAFFX is basically a more expensive version of AIVSX. And the only time frame that AIVSX doesn’t outperfrom LAFFX is on the 5 year average. Does is justify what you call churn and burn? No. Is there something better to move to within LA? IMHO, no. Not without taking more risk.
As far as LBNDX, that fund isn't bad. Does pretty well recently compared to AHITX. However, AHITX has a better yield. You could find better high yield funds, but LBNDX is decent. I'd look at OPSIX as a replacement for LBNDX or OIBAX if you want some international exposure on your bonds. Either one would have blown LBNDX out of the water over any meaningful time frame. You don't need to call the other Jones guy in town to see what he recommends. I'm sure either B24, rankstocks, Miss Jones, or I would be more than happy to review your investments and give you a second opinion. Funny that you call this guy YOUR client. You left Jones what, almost 2 years ago? This guy is just now bringing his portfolio to you? He must have thought you were wonderful, but he just wanted to give the new guy a chance. Yeah, that had to be it. Or maybe he just didn't know how to contact you.So in the late 90's it would have been justified to move away from American Funds because the lagged the tech heavy market to find better returns. Wow...now where would that get you....chasing returns...awesome...thats what I wanted to read....did everyone get that....instead of building a balanced portfolio, with highly rated funds and rebalance quarterly (my preference)...we should all pull out our local newspaper and find last years winners and BUY....CHase returns....Now we're talking...that is worth the 75k in training. I left 1 year and 2 months ago...I honored my non solicit contract (somewhat)...IMHO you should look at mf's 5 year number compared to their history and try not to use funds that have been around less than 15 years...If the funds 5 year number is well below its historical, I would suggest that fund...if however it was way above that number, I would steer clear or take some off the table. Returns tend to skew back to their historical means...just FYI...I love Miss Jones
OK NOW I’M CONVINCED…YOU GUYS HAVE MAN CRUSHES ON EACH OTHER…
You can be a tad annoying at times to us Jonesies, but I have to admit that you're dead-on with this post.Couldn’t you find a fund within LA to NAV to …or would that be to hard to do…or maybe you know you need to keep above the performing line. The big problem had to do with the jt acct having tax gains…if your new and just peforming a sales job…I guess you don’t worry about causing tax problems. The whole time he’s doing this…“wow, this job is easy, I’ll just go through my book and move to different funds”…as I’ve said before …the new people jump into an office and churn and burn without prospecting…depending how big or small the office is, this lasts only a few months. Then the pipeline of new clients, assets have dried up, and the dude starts going…wow this is tough, nobody wants to talk to me…nobody wants to buy my 35 year bonds paying 5% or let me review their statements from Merril, SB, Morgan, AG/Wach, LPL, RayJay. Doubt lingers into his mind, he starts saying the markets are causing his production to suffer, to much competition, nobody has any money…blah blah blah…and THEN he leaves…and then a new person comes in and the cycle starts allover…but you know Ed Jones doesn’t care because they’re getting the upfront A share fee everytime…ROll on…Has the “our clients hold mf’s for 18 years” changed or do they still spew that out of the dirty Mississippi River…
At least your man enough to admit. To my credit,,I've "been there done that" with Jones. HQ wants to preach one way and the field supervision rewards another way....THAT is why we call Jones a bunch of hypocrits...Just like a gentlemen who went to my christian church when I was younger. I was in the video store one day and I saw him return porn....Say one thing and do another...Jones trys to be holier than thou and spews porn....(disclaimer...I like porn also)
I missed the part about us discussing building a balanced portfolio. You didn't say what else your client owned, so I went with what info I was given. I realize my mistake was simply stating the most recent history and performance numbers. But evidently they're irrelevant. Nobody needs to know how well a fund manager or team does in a bear market. I should have said that CAIBX has outperformed LAFFX on the YTD, 1 year, 3 year, 5 year, 10 year,and 15 year returns. Is that chasing returns? No. It's a pattern. If you are using the reversion to the mean arguement, then the mean is better on CAIBX than LAFFX and any reversion would work in the favor of CAIBX over the long term.
Question: If you have a client tranfer assets into your office do you always continue to hold them? If that client owns XYZ investment that is more expensive and has a lower return than the investments you normally use and trust, don't you sell XYZ investment in favor of your own? What's the difference in this case? Is it simply because it was sold through an EDJ office? Or, does it just piss you off that you didn't have the opportunity to transfer the client into your new office and tell him that you are sorry that EDJ made you sell him those mediocre funds. You know they have this list we had to sell from. I really wasn't allowed to sell you a better product. It's all they had. NOW that I'm independant I can sell you anything I want. I was so stupid back then, you know, 18 months ago. I've learned soooo much since I left. Let me show you this fund from...If Lord Abbott is such a bad fund company, why are they still a preffered or Putnam or hell even Hartford? I could transfer ANY fund from ANYWHERE and with enough jockeying of numbers and hypos, I could justify a commission trade. That is all it is to you Spiffy, a way to justify your commission trade. As I was taught, you can move funds every 3 years at Jones…just put in the fspend…we reviewed acct and found xyz fund to have a better performance in the last 1-3-5 year time frame and client advised to move. zip zap…wally pak…NEXT…“Look Dorothy, its not a wizard afterall”…Your always chasing returns. Are the analyst at LA dumbasses?? IF I remember all the funds at LA aren’t on your preferred list…did you look at everything they have to offer as a possible choice to NAV…well of course you wouldn’t do that…hell you don’t get paid to do whats right for the client…Would you call your LA wholesaler and have a conversation about the underperformance compared to CIB…what are they recommending as a possible replacement for Affiliated…etc…hell no…why would you …you don’t get a trip category doing that…but “WE"RE THE ONLY COMPANY THAT DOES THE RIGHT THING FOR OUR CLIENTS”…what a crock of shit…
Seriously I use to compare everything to CIB-hence CIBforeveryone! I now have realized on the outside that not all funds have exposure to international stocks and they aren’t all supposed to move the same direction at the same time.
My RL used to talk about putting money in the funds that were up on the statement because then the client didn't really see the sales charge. Buy high, sell higher was the mantra. This is another example of how A share business influences advisor recommendations.I’ve got all your f’'ing tricks down pat…it’s nothing but a facade in St Louis…a big joke…the whole thing …from training to marketing…you guys are a bunch of frauds…Why has the s&p returned something like 11.6% the last 15-20 years and the ave clients return is less than 4…because of jokers like you…moving their money every 3-4 years, chasing returns…and generating those great GP/LP returns…damn you guys are wizards…
I love CIB, but CIB and LAFFX are two completely different funds. According to the latest AF mailer CIB has only 20% in US-based Equities (I stress the “based” cause with the mega caps AF owns most of the companies are global but you can say MMM is American cause its Prez sits in a bldg in Minneapolis!) And I’m not a huge Lord Abbett fan, but I doubt they will be sucky forever (same with VK).
Well heck…why should we care if they are “sucky” for any length of time. Just find something, anything, that shows better performance and move them. Again, its not “making sense of investing”…its…“money in motion”…And this whole rant has nothing to do with LA…as I probably have very little % compared to my total holdings and a lot more in American Funds…which they suck this first quarter…I guess I need to find another fund company thats done better this past quarter and move my AF clients…but the issue has to do with not thoroughly looking at what any fund company has to offer before jumping to something else. But then why would we…why would we try to build trust with any of our clients…because the Jones thought process is they are customers…not clients.
Hartford's returns have been very good. You really should take a look at them if you haven't already. At a minimum you should get to know Cap App.
CIB is right. Not all funds are created equal. But we aren't talking about all funds here. We're talking about those two funds that the EDJ FA sold and moved to CIB. First of all, he couldn't have done it without your client's approval. So somewhere in the process YOUR CLIENT!!! decided to take the direction of another advisor. I don't agree with the buy and forget strategy that Jones is so famous for. I believe that if there is a valid reason to move from one fund family to another, performance being the major one, then you do it. I'd rather my client pay me another commission to make the move and understand that I'm trying to make money for him over the long term than to stay in a fund that isn't keeping up with everything else. If I don't do it, some punk like you is going to do it for me. This new FA, when reviewing YOUR CLIENT'S!!! portfolio, found an area that could use some improvement. He made a change. My personal feeling is that he made a good change. Did it cost YOUR CLIENT some tax dollars. Absolutely. But you go ahead and sit there and tell that you know that CAIBX would have put/kept more money in his pocket over the last 1, 3, 5, 10, or 15 years, but it was a bad move because he now owes some taxes. It's always better to save money on taxes than to move to different fund that has historically made more money. Jones has never "taught" me that I can switch funds every three years. In fact, my RL says that in his office the minimum is 5 years. Compliance sends fspends for ANY fund to fund switch I make. Don't give me any crap about Jones teaching us to switch funds all the time. They'd just as soon us leave them alone forever. If you think people don't do EXACTLY what you're telling me I shouldn't be doing (chasing returns) then you are naive at best. They're going to see some magazine article somewhere and wonder if their fund that bspears sold them is that good. Next thing you know, they're on Smartmoney.com typing LAFFX into the search field and within 30 seconds comparing it the fund they saw in the magazine. Before long they're doubting your intelligence. Again, you didn't answer my question. You went on another rant about preferred funds, compliance, etc. I stopped reading. So, I'll ask again. Let's say you transfer a new client into your office from say, UBS. In his portfolio he has fund XYZ that in your opinion is not as good as fund ABC that you use, know, and trust. What do you do with it?You know, at LA if you don’t want to use LAFFX you only have one other LC value choice. And it’s really not true LC value. It’s All Value. And in our system it’s a growth fund. So, if he was strictly looking at the preferred funds (which I would guess he would be inclined to do as the new FA) he’s not going to find another LA fund to switch to and not add additional risk to the client’s well balanced portfolio. So, he can leave it alone or have a discussion with the client about options. Evidently your client made the incorrect choice.
[quote=CIBforeveryone]Seriously I use to compare everything to CIB-hence CIBforeveryone! I now have realized on the outside that not all funds have exposure to international stocks and they aren’t all supposed to move the same direction at the same time.
[/quote] WOW.I just found out that the person who took over my office churned and burned a few accounts lately too (an understatement). This individual has been in five (count them) 5 different positions with three different companies in 6 years, and with Jones twice in that amount of time. This individual was allowed to take over two (count them) 2 different Jones offices and had two outside positions and is the least admired person in the two regions “it” has been a part of. “It” tells a lot of lies, does a ton of Hartford, and is probably sucking it up big time by now as far as returns, but “it” doesn’t care. “It” will be Seg 3 forever. “It” sucked up to the right people in St. Louis and is their pride and joy, I imagine. I have seen a HUGE breakdown in compliance in Jones as of late. They are letting the brokers do whatever they want to do to people.
I would investigate the fund family dumbass...I would do DUE DILLIGENCE...If I could justify nothing met satisfactorily, then yes I would explain to the client what I've done. But on the first meeting, to make a suggestion like this without explaining the fees (straight from my client) and or tax situation..is...well...worth a complaint in my book. You didn't answer my question...Would you call LA and talk with them about the clients acct? Hell, would you call your internal mf research and talk with them about it...well HELL NO you wouldn't...none of this crosses your mind...alll your doing is calculating YIELD TO BROKER....another famous phrase I learned at the green maching. So are you exhausting every avenue in making a change for the client that is in its best interest? Are you evaluating every angle that would have the most benefit to the client and the least benefit to you...are you..everyday.
This is the dumbest argument I have ever heard. You two realize you are comparing two very different funds, right?
Sorry to use the word dumbass, but Maxstud made me do it…
its fits you, you’ve been one of the biggest dumbasses I have ever had the misfortune to read.
[quote=Maxstud][quote=CIBforeveryone]Seriously I use to compare everything to CIB-hence CIBforeveryone! I now have realized on the outside that not all funds have exposure to international stocks and they aren’t all supposed to move the same direction at the same time.
[/quote] WOW.[/quote] Max you must be in a better mood today. CIB, how long did it take you to figure out that mutual funds may invest differently, have different objectives, have different allocations than other mutual funds? What makes this amazing, you didn't even pick the best AF. I second the WOW.I was feeling the same towards you…sucks when the truth hits you pretty hard.
Maybe I was premature on the good mood.its fits you, you’ve been one of the biggest dumbasses I have ever had the misfortune to read.
How many investments have you swithched today Max…was it bond to funds or funds to bonds or hell even the scarry funds to funds…
This thread has reminded me why I do fee based business. Never will a client (or another broker for that matter) question when I make a change because there is no commission. They know the advise is based on what I feel is best for them, not a commission. Also, my clients know that sometimes doing nothing is the right thing to do, and fee based accounts eliminate any suspicions.
[quote=Borker Boy]
I also don't understand the value in charging someone 1-1.5% every year to put their money into an "advisory" account of mutual funds that auto-rebalance. There's almost no work involved for the advisor, and little if any for the B/D, but we're going to make them pay us year after year after year? For what?[/quote] You don't know what you don't know. If rebalance is the only thing the client is getting, then you would be correct. There is a little more involved however. Typical Jones "cheapest get it and forget it until I'm close to trip" mentality.100% commissioned based business does create conflicts of interest.
I would argure that 100% fee business creates more conflicts of interest. I would further argue that any financially struggling financial advisor has the most conflicts of interest regardless of mode of compensation. The least conflicts of interest are with an advisor who is financially secure and can charge fees and/or earn commissions.My clarity comes from being in a very small community, where reputation is everything. I see 90% of my clients at the Walmart, Church, sporting events etc. I go out of my way to make sure I’m doing what is in the best interest of my client. I would bet, based on assets, I’m the lowest paid advisor in my town, but I know in the long run this is how its to be done. Every client contact I have, I could find someway to justify to my clients a certain investment which will ultimately benefit me. IF I followed the famed quote “sell without a conscience”…I could double my production overnight.
[quote=Primo][quote=Maxstud][quote=CIBforeveryone]Seriously I use to compare everything to CIB-hence CIBforeveryone! I now have realized on the outside that not all funds have exposure to international stocks and they aren’t all supposed to move the same direction at the same time.
[/quote] WOW.[/quote] Max you must be in a better mood today. CIB, how long did it take you to figure out that mutual funds may invest differently, have different objectives, have different allocations than other mutual funds? What makes this amazing, you didn't even pick the best AF. I second the WOW.[/quote]I don't think you guys picked up on the slight sarcasm, probably because I didn't word it strongly enough. My point is that the culture at EJ is to look at a fund like CIB and say "look at the 18 years of consistency and total return." "Who would ever argue with that?" vs. evaluating what CAUSED that end result. My point is that back then I didn't really take into consideration that the 18 years of history (at that time-now 20) was built on 18 years of generally rising bond values. I didn't take into consideration that the later years included a growing international stock position. At EJ a "Growth & Income" fund is a "Growth & Income" fund. The "system" doesn't do anything to go beyond that.
In the outside world I realize that if I can add more moving parts to the clients portfolio (such as Van Kampen Comstock or a Lord Abbett Affiliated) I will have to go through some temporary periods of underperformance on that ONE fund, but something else will be outperforming. The client realizes I am choosing this fund for a reason, and it has nothing to do with my compensation. As the tide shifts from one sector to another, the moving parts will shift, and because I am MANUALLY rebalancing as appropriate I can provide a SMALL amount of alpha to justify PART OF the advisory fee the client is paying.
The rest of the fee is for advice & counsel on other areas of financial planning, and another part of it is "fee in lieu of commission." Keep in mind we only need to "justify" the expense ABOVE what they would pay a Jones IR, and if they are being traded like some Jones IRs do, the bogey is not very high...
Enough ranting, we've covered all of this in other threads anyway.
Same thing happened when I left Jones. New rep tried to get clients out of non-AF funds I had sold. I know VK has been weak for the past three years, FT too, but I also know these were good money managers and they would come around. I told my clients to have patience, new FA told them to move to AF! I just asked why they would want to pay a broker another 3.5% because she could show them funds with better past results. Her actions, encouraged by her mentor and field trainer, made it easier to get clients to come with me.
I'm not feeling any pain, but I'm sure you are. [quote=bspears]How many investments have you swithched today Max.....was it bond to funds or funds to bonds or hell even the scarry funds to funds....[/quote] Let me count......zero. So why don't you STFU and get down to Wal-Mart to get another can of Copenhagen before they roll up the sidewalks and you get arrested for being out after 6pm on a weeknight. mmm Mayberry gotta love it.I was feeling the same towards you…sucks when the truth hits you pretty hard.
Liar. No pain here in smalltown america. Low expenses + 350k in Jt taxable income + 28k Fed refund and 1800 in State Refund....yah..after 6pm I'm home with the family or helping coach my daughters softball team. Between my wife and I, she put away 42k in her 401k/profit sharing plan, I added 15k to mine. Purchased a condo in FL, purchased 50%(with brother-in-law) 120acres of farmground....yah I feel the pain...from 01-06 at the green machine.
Spears, you're not going after my pipeline are you?? Thought I would lighten up a rather dark thread!I see 90% of my clients at the Walmart …
[quote=bspears]
Liar. No pain here in smalltown america. Low expenses + 350k in Jt taxable income + 28k Fed refund and 1800 in State Refund…yah…after 6pm I’m home with the family or helping coach my daughters softball team. Between my wife and I, she put away 42k in her 401k/profit sharing plan, I added 15k to mine. Purchased a condo in FL, purchased 50%(with brother-in-law) 120acres of farmground…yah I feel the pain…from 01-06 at the green machine.
[/quote]Liar
Okay, maybe not 90% at Walmart…You’re right…I need to lighten up on the green machine, but man when I get on a roll, its like I go into overdrive. It all stems from the backlash I witnessed when great people would leave to wherever…and the lies would kick into overdrive. They won’t make it, they’ll make less, they’ll finally see what a great company we are…blah blah…and it’t absolutely the opposite. THe green machines shit DOES stink…I was there long enough to see/witness/be trained in all the little tricks to the trade. Maybe I was in the worst region, I don’t know, its the only one I participated in. But when you preach, we do things the rightway, and you have several top producers(not all) in the region teach you to basically churn and burn to make your month…well it just leaves a bad taste in your mouth. Nuff said…
You wish it was a lie…and if the grain prices explode to the downside, I will to…
You're such an idiot, I'm suprised you can spell 401k.You wish it was a lie…
maxstud my aren’t you the clever one.
Yes.maxstud my aren’t you the clever one.
Max, come on man. I know your happy not to be selling used volkswagens anymore…go and type rankfunds on the green screen, find the LA Affiliated and make a call list and move those to CIB. Make sure you have 3 reason’s why this is a good move for your customers. Don’t forget to let them know you will be sending them a form to sign on the switch…just to cya. Let us know what your yield to broker was today. Tomorrow we will do rankstocks and do this allover again…With a little coaching, we may get you to seg 3 in no time…
Nobody has asked yet, but what would you have done different. You're the new FA sitting down with the client for the first time. You're reviewing the portfolio and notice LAFFX has a annual return number of 5.06% for the last 8 years and 1 month. That's not really the return number that you would like to see. So, you run a quick hypo on CAIBX (I know, I know it's a completely different fund) and find that over the same time frame it would have returned 10.5%. Wow, that's a big difference. On $100K it's a $78,000 difference.
So, now you have some choices. One, Just ignore it. If the client doesn't bring it up, don't talk about it. No harm, no foul. Two, suggest he make a change to another fund within LA. This still causes a taxable event and the dollars out of his pocket for that, but no commission dollars. In order to find something that has performed better, you have to add additional risk to the portfolio since there are no other funds in a similar category at LA. That screws up your bar chart and now you have to figure out what to do with that info. Three, move to another fund, like CAIBX, that keeps your bar chart in balance, doesn't add risk, but has shown better returns over the same time frame. There is a cost for taxes and a cost for commissions on the move to AF. His bar chart remains the same, so in your mind that is a good thing. Since spears is always right and the Jones guys are always wrong, what do you do if you are Bspears? BTW, that 5.06% number is actually from a client of mine who currently owns LAFFX for that time frame. I'm curious what the brilliant minds out there would tell us at Jones to do.If I still believed in the money managers at LA, I’d leave it and continue to monitor it. (As if we at Jones have the resources to even determine whether we do or don’t believe in a fund’s money managers. )
Woudn't you be guilty of chasing the winners if you moved him to AF? LA is a quality fund family and will eventually come back. Besides, if in a couple years CAIBX is lagging LAFFX, do you move the client back over to LA? Where does all of this end?No need to answer my last question. I read the title of this thread and got my answer.
Arbitration...and then...eventually...jail.Hell Spiffy, I could justify moving anyone of the funds my clients hold today, anyone of them. I just don't believe in moving away from good quality funds, because I can find another fund with better PAST performance...If my research says we're not recommending xyz fund because the fund manager is gone, the objective has changed etc...I would look for another fund to compliment, BUT I would investigate the LA funds to find a suitable investment....Jones brokers automatically look to another fund family, right off the bat....churn and burn baby, yield to broker..
[quote=Spaceman Spiff]
Nobody has asked yet, but what would you have done different. You're the new FA sitting down with the client for the first time. You're reviewing the portfolio and notice LAFFX has a annual return number of 5.06% for the last 8 years and 1 month. That's not really the return number that you would like to see. So, you run a quick hypo on CAIBX (I know, I know it's a completely different fund) and find that over the same time frame it would have returned 10.5%. Wow, that's a big difference. On $100K it's a $78,000 difference.
So, now you have some choices. One, Just ignore it. If the client doesn't bring it up, don't talk about it. No harm, no foul. Two, suggest he make a change to another fund within LA. This still causes a taxable event and the dollars out of his pocket for that, but no commission dollars. In order to find something that has performed better, you have to add additional risk to the portfolio since there are no other funds in a similar category at LA. That screws up your bar chart and now you have to figure out what to do with that info. Three, move to another fund, like CAIBX, that keeps your bar chart in balance, doesn't add risk, but has shown better returns over the same time frame. There is a cost for taxes and a cost for commissions on the move to AF. His bar chart remains the same, so in your mind that is a good thing. Since spears is always right and the Jones guys are always wrong, what do you do if you are Bspears? BTW, that 5.06% number is actually from a client of mine who currently owns LAFFX for that time frame. I'm curious what the brilliant minds out there would tell us at Jones to do. [/quote] What would or should the Jones IR do: The variables.... 1. Is this client investing new money on a regular basis (am I getting paid from this client above trails?) 2. How is my month going so far? 3. How close am I to making the next segment or trip and will 1 or 2 trades make the difference? 4. Did I hear from my RL or other figure head within the last week and is there pressure to go to yellow from red, or green from yellow, or seg 2 to seg 3, or seg 3 to seg 4. Then: Look at 10 year results on LAA: 5.1% ICA: 5.47 Van Kampen Comstock: 5.95 S&P 500: 2.87 Explain to the client that stocks in fact have shown a low single digit return over the last 10 years considering the short upside then extreme downside early, and 10 year results only tell part of the story, but it is a reasonable way to compare similar investments against a benchmark, as long as the constants are kept equal as much as possible. Explain that there is some variation between these funds, but they are all within .85% of each other, and there is no way to know what fund manager will be best over the next 10 years. Recommend the client do nothing and explain your only compensation is .25%/year, and you get 40% of that, so it's really .1%/year. Unfortunately that is the nature of the way I do business. It is your decision if want to pay me for a change, but I can't justify it based on the facts. What I will have to ask you to do is thank me by referring your friends, family, and neighbors, because my primary source of compensation is new dollars coming in either through existing clients or new clients. I am keeping it real and all of the above are real issues with the way Jones does business. Probably the other big firms, too, but EJ is the only one I've lived.CIB—if it were me I would split the ticket and put into ICA and VK Comstock…get the FULL load…take just a little off the top and buy PFE and have the dividends and int off the mutual funds directly reinvest into PFE…I am a revenue machine…and a year from now if PFE still isn’t doing anything I will sell PFE and purchase dell and move comstock to LA affiliated and move ICA to a tax free bond paying 3 points…
Funny…
Unfortunately spears this is a loophole EJ compliance doesn't really have a system to track. You can set everything to pay cash dividends, and then reinvest it at sales charge when you are contacting the clients. Word is there was a guy doing this that was a "top producer" in his region. Every stock, bond, and mutual fund was paying cash dividends. I guess he even talked about it at presentations to the region and no one asked if he was charging sales charges on the reinvestments. Later it was learned that he was.I bet we were in the same region…My RL/GP had a board with investments in circle. Everything stocks, funds, interest was paid to the mmkt. Then there was another arrow pointing to a word…what was that word…OPPORTUNITY…yah thats it…I know them all…every trick…every gimmick…every smoke screen…
I'm literally praying that this didn't (and doesn't) really happen. If it did, to say the least, I'm nauseated.I bet we were in the same region…My RL/GP had a board with investments in circle. Everything stocks, funds, interest was paid to the mmkt. Then there was another arrow pointing to a word…what was that word…OPPORTUNITY…yah thats it…I know them all…every trick…every gimmick…every smoke screen…
Borker, other than LPL, I’ve been at one firm, EDJ’s. Are you suprised at this sales aid…I could come up with dozens more…
I have a serious question. Would this mutual fund change be an issue if it were a C share or in a managed account?
I'm literally praying that this didn't (and doesn't) really happen. If it did, to say the least, I'm nauseated.[/quote] Quite honestly I really hoped it wasn't true as well, especially because of how highly regarded this IR was (probably much like Spears GP/RL, maybe it was the same guy). I really couldn't believe everyone was that blind when I was asking the question to myself as a 3 year vet. It was too obvious.[quote=bspears]I bet we were in the same region…My RL/GP had a board with investments in circle. Everything stocks, funds, interest was paid to the mmkt. Then there was another arrow pointing to a word…what was that word…OPPORTUNITY…yah thats it…I know them all…every trick…every gimmick…every smoke screen…
This is my first post, sorry if I screw something up. To Bspears and others... I am looking for advice. I have worked at Jones for 8.5 years. Trailing 12 months gross is about $350k. I was a "new-new", starting a new Jones office in new location from scratch, in a town where I had virtually no business or personal relationships. I followed their formula, did all the door knocks, seminars, etc., and now have a very loyal clientele. I am Seg 4, winning every trip, and getting profitabilty bonuses every trimester (about $20k in 2007). In the last LP offering, approx 18 months ago, I was passed over. I had enough profitability, but apparently not enough volunteer hours. The same thing happened to two other FAs in my region. The real slap in the face was that, due to our profitablity, and OUR own rec's, our BOAs were all offered LP shares. Our RL/GP has never discussed this with us. He did however, "highly recommend", all three of us for "Visiting Vet" duties in STL. All three of us have completed 2 out of 3 VV weeks in STL this year for no compensation, with the hope that we will get some LP in the next offering. Between the three of us, we should have close to $200 mil AUM. Advice???Hi there, I left Edward Jones 8 days ago. I moved to Raymond James. I had gross of $365,000.00 in 2007. I have worked for Jones for 6 years as a licenced FA. I have no limited partnership and although I do win the trips they are a taxable benefit and believe me the tax is not inconsequential. I have done about 3 months volunteer service in EJ in those 6 years. I have now joined Raymond James. I received a substantial transition and bonus payout. I own my own book now but didn’t before I left. It is worth around $500,000.00 to sell at its current value. The payout on the independent platform is 85%. Sue I have costs but I am sharing them with another FA that left with me. By my calculations my net payout will be about 70%. Twice the payout I was receiving at Edward Jones. Add that all up and it was a million dollar move for me. I am staggered that more FAs haven’t seen the light. I am sure that increasingly many will. Alan AKA Wombat
Go Indy once the market turns! PM me and I’ll give you a blueprint.
It’s time to move on. I can supplement uwec’s advice if needed. He and I both had very good moves to Indy.
Source URL:https://www.wealthmanagement.com/forums/whats-firms/arbitration-and-green-machine