Edward Jones changes performance expecations

It's about time.  I see too many veterans (10+ years) doing 15K and it just boggles my mind.  I think 22K for an established advisor is reasonable.  That's like $21-23mm in wrap business.  Or $35mm in A share trails plus $15K in transactions.  After 7-10 years, if you can't muster up that production, you really shouldn't be in business. 

The writing on the wall is that you need to do wrap business.  Obviously they are spinning it how they want, but that's their bottom line.  Even if you have just 10-15mm AUM in wrap business, you only need to do another $5-10K in transactions per month.  Between transactions, trails, maturing assets, new money, and automatic (DCA) business, I don't see how you CAN'T do an additional 5-10K.  There is simply no reason why someone can't hit these numbers if they have a good plan to get there.  I am only 4 years in, and I have $7K in revenue each month just walking in the door (wrap, trails, DCA, etc.).  So $10K is pretty much a given, without much of any work.  If I do some transactions, bring in one decent new client, and not much else, my month is at least 15-17K.  How tough is that to do?

Why is it a bad sign from Jones?  I keep hearing people say this, but I don't really understand why it is viewed as a negative sign.   Did you read the part of the announcement that said it has been 13 years since they changed the performance expectations?  If it was such a negative sign, why doesn't it take effect immediately?  The changes don't start until 2011 and aren't completed until 2012.  That give someone who might be struggling today the rest of 2010 to get it in gear and get their numbers up to where they probably ought to be anyway. 

What good does a 12 month rolling average do?  With a 4 month rolling average if you have a couple bad months in a short amount of time it shows up immediately.  It throws up a big red flag that says that you're struggling.  It allows for immediate help from the firm and your region.  But yet it's not so short a time that the firm and the region panic for no good reason.  How does a 12 month rolling average allow the firm to better judge who needs assitance and who doesn't? 

What are the little things that they need to change? 

13 years?  I thought they just bumped up min from $14-15k/mo to $18k within last 4 years or so.

So they changed the meeting expectations line to 22K per month from 18K per month, correct? That by my math is the second time in the last 4 years that they changed the line. They moved it from 15K to 18K and now to 22K. I understand why they did it and it was probably time to do it. When you work for yourself you are always on a 1 month standard ...not a 4 month as an employee.

[quote=Spaceman Spiff]

Why is it a bad sign from Jones?  I keep hearing people say this, but I don't really understand why it is viewed as a negative sign.   Did you read the part of the announcement that said it has been 13 years since they changed the performance expectations?  If it was such a negative sign, why doesn't it take effect immediately?  The changes don't start until 2011 and aren't completed until 2012.  That give someone who might be struggling today the rest of 2010 to get it in gear and get their numbers up to where they probably ought to be anyway. 

What good does a 12 month rolling average do?  With a 4 month rolling average if you have a couple bad months in a short amount of time it shows up immediately.  It throws up a big red flag that says that you're struggling.  It allows for immediate help from the firm and your region.  But yet it's not so short a time that the firm and the region panic for no good reason.  How does a 12 month rolling average allow the firm to better judge who needs assitance and who doesn't? 

What are the little things that they need to change? 

[/quote]

Spiff I have heard others say you drink the kool-aid but my lord you inability to discuss the situation in terms of reality is daunting.

A. It is a bad sign from Jones only if you are a financial advisor there. Why? It is a sign of things to come, more and more ... It is a sign that the company is not happy with their profits and is taking ANOTHER step towards squeezing your #!$#@$. If you weren't here for when the lowered the commission on equities or when they changed postage from being paid out of their 60 to being paid out of my 40. If you really look at the change in compensation over the last few years - every single thing is to get more $ to home office. Literally, remember that whole we are a partnership not a corp...  Listen spiff ... my point here is that it isn't about the gross amount changed it is about home office NEEDING more money from the field.

B. "If it was a negative sign why wait until the beginning of the year"? I seriously do not see at all what this has to do with the situation. Also it is already pointed out that they have in fact changed standards, very recently. In fact the only standard that continues to move is the amount necessary for profitablity, bonus, D-trip, etc. Not the "Exceeding" which actually means nothing more than a pat on the back after you are out 3 plus yrs.

C. The 4 month rolling average is not a good baromator. Not all. In fact don't you get tired of the hole yoyo effect? And how could you rationize how using a 4 month is a better guage than using a 12 month? That is just not common sense. Isn't everything guaged off of what we make in a calandar year?

D. Why I really think this is poor sign from Edward Jones is that there was nothing in here that would or will help the field at all. (BTW- Spiff I can't believe you actually said that your poor numbers give the region a way to help you out, have you ever gone below in your career?).

They did not update the problems with the chart already. Namely the GKN, new/new, open office performance levels that are completely ludicrous and unfair to certain types of starters.

They also did nothing to slow the rise of the chart. I personally don't care if you want to catch those people who stop working at year 5. However if Ejones really really doesn't believe that a new/new has a harder time starting a business in 07-10 than in 04-05, wow..... So if they had any other reason besides making them more money they would have fixed some of the small excisting problems with their performance chart, instead it appears like they spent 20 mintues on this entire project. Where is the deep thought, where is any benefit to me the financial advisor?

A. I agree that this is about needing more money from the field.  That's where the company makes it's money.  And yes, the GPs make their money from that source too.  I've been at Jones long enough to remember the last change in production standards.  I also remember it being a decision back then about HQ needing more money from the field.  We had 2000 FAs back then and a correlating support staff.  Today we have 12,000 FAs and the correlating support staff.  The number of things we have more of today vs back then is tremendous.  The GPs still make roughly the same return.  More things mean more money is needed.  You can't honestly tell me that it costs the same to run the avg EDJ office in 2010 the same that it did in 1997.  I believe this is a function of the average branch just simply being more expensive to run and therefore to become profitable.  If what it takes is to raise the minimums, then that's just the way it has to be. 

B.  They could implement this right now and save a ton of money just on the div trips alone.  As it is, we have one trip cycle before the new rules go into effect.  They could say this starts right now and probably 1/3 of the people who just squeaked by this last go round wouldn't make it the next time.

I'm not sure about your P&L, but mine doesn't say anything at all about production standards being a part of the bonus system.  It's dependant upon the firm's profitability and my office profitability.  If you're concerned about meeting expectations, then bonuses aren't even on your radar.  So that's kind of a moot point. 

C.  The only thing that I'm aware of in our company that is based on our 12 month production is LP (every 3-4 years) and production awards (snapshot  in Dec to know which plaque to give you).  Bonuses are based on trimesters (4 months).  Segments are based on the 4 month rolling average.  That's about the only things that production really affects.   

I don't really think it matters that much what barometer they use.  Certainly a 6 or 12 month rolling average would be smoother than a 4.  But that means that problems are as easily spotted as they would be with a shorter average.  I have been below expectations in my career.  I've also had some monster months.  Those monster months have a tendancy to mask your poor performance.  Even in the 4 month cycle you could have a $40K month followed by three $10K months and you'd still be meeting expectations for 4 whole months.  Nobody is going to notice that.  At least at the end of that 4th month you hit the radar screen and possibly get some help from your region.  It's not a perfect system either, but I think it's a nice middle ground approach between month to month numbers and 12 months numbers. 

D. I don't think it makes sense to create a bunch of different production charts for all the different scenarios that FAs find themselves in.  Obviously a guy who just took over a $40 mil book is going to have an easier time of it than a new/new.  That's just the luck of the draw.  Life isn't fair, get over it.  10 years down the road it won't really matter. 

Charts aren't supposed to be beneficial to the financial advisor.  The only thing I get from my chart is a good feeling or a bad feeling depending on where my dot it.  That's it.  They're a yardstick we use to see how we're doing compared to what the firm wants.  Charts are indifferent to your success or failure.  So, if you thought that Jones was going to fix your personal production issues by coming up with a new production chart, then you need some psychiatric help. 

Charts are also indifferent to market conditions.  We're expected to sell enough of something to get our little dot at a certain spot on the chart.  Jones, the company, however is not indifferent to market conditions.  Surely in your region you've got one or two folks that got to work with Jones longer than they should have in 2008 and 2009.  That's because Jones fudged their rules with the charts because of market conditions.  The chart still said you were below expectations.  Jones let you keep your job and try to make your chart look better.   

I'd like to see the charts change more often.  Changing once every ten years isn't great.  If two years from now inflation is running rampant and it costs more money to run a Jones office, it makes sense to me for Jones to calculate average profitability for an office and adjust the chart up according.  It might be a small 1-2% jump, but that would be easier to swallow than a 22% jump over two years.     

A 4-month average seems like a reasonable metric for someone in their first 3 to 5 years maybe, but after that it just seems like a way to encourage transactional business.

Lower targets for new people tend to give you time to develop the business the right way, but eventually you need higher standards for the reasons described above.  But, like the wirehouses, it is hard to make any money while you are building your recurring revenue stream....and measuring someone on 4-month periods is counter to building long-term recurring revenue (for new FAs).

EJ is not the only firm that has those competing incentives--in fact, they are the last to adopt compensation policies to accentuate it.

spiff- good commentary

However there is some pretty tough stuff in this law change. If you EVER in your CAREER have your 4 month drop below 22K. You get put on goals, if you get put on goals 3 times in your career, they now have the legal side of things set up to take your office. Also once on goals you have 4 mnths to get the target or you are FIRED.

I am just shocked at the concept of this. Again I have no problem with the seg 3 out 10 yrs doing 15s. But this change shakes us at the core for the people out between 3-5 yrs, and 15 plus.  I have a problem when your kid is seriously ill, your mom or dad dies, your spouse is sick, etc. I have a huge problem that now we will always have to watch our back for 1 bad month.  With this change, I believe it crazy to keep this measurement on a four month instead of a 12. I mean spiff there goes the idea of traveling to the West Coast for 3 weeks or doing anything that would take you out of the office for a long period of time.  Also to become excempt you need to qualify for the FMLA, and that takes a serious situation with YOU and a Dr. Not you mother, brother, wife, kid, etc.

If anyone says anything about us being a family at summer regionals, I think my Ejones career will be over.

how do you guys get any work done while posting all this pointless banter?

I agree that it seems harsh.  But how many times have we heard people, inside and outside of Jones, complain that Jones let's people hang on too long?  Now you're complaining when they say they're going to make it a little tougher? 

We're still talking about a 4 month rolling average here.  I didn't read that you needed to qualify for FMLA in order to be exempt.  If your kid gets diagnosed with Leukemia (happened to an FA here in STL) or your wife becomes seriously ill I'd bet you could talk to your RL and your area leader and they could work something out.  Parents dying shouldn't take you out of the biz for 4 months.  Shouldn't even take you out for 4 weeks.  Who travels to the West Coast for 3 weeks?  How many FAs do you know that leave their offices for a long period of time?  FYI, get your office profitable on a 12 month rolling basis (they threw you a bone) and you're exempt.  This whole thing become a non-issue.   

You're talking about a really small group of people that this might affect.  Most folks who are on the bubble are going to just turn the heat up a little and keep on moving forward.  That's what they did last time.  So instead of having a bunch of guys hanging out at the $22K mark, you'll have a bunch of guys hanging out at the $24K mark.  They'll stay above whatever figure it is and just keep dialing.  It will have the desired affect of Jones pulling in more more money, but not payout out big bonuses.  Just like now. 

daily journal with quick updates at the end of the business day

not equal to

A. I agree that this is about needing more money from the field.  That's where the company makes it's money.  And yes, the GPs make their money from that source too.  I've been at Jones long enough to remember the last change in production standards.  I also remember it being a decision back then about HQ needing more money from the field.  We had 2000 FAs back then and a correlating support staff.  Today we have 12,000 FAs and the correlating support staff.  The number of things we have more of today vs back then is tremendous.  The GPs still make roughly the same return.  More things mean more money is needed.  You can't honestly tell me that it costs the same to run the avg EDJ office in 2010 the same that it did in 1997.  I believe this is a function of the average branch just simply being more expensive to run and therefore to become profitable.  If what it takes is to raise the minimums, then that's just the way it has to be. 

B.  They could implement this right now and save a ton of money just on the div trips alone.  As it is, we have one trip cycle before the new rules go into effect.  They could say this starts right now and probably 1/3 of the people who just squeaked by this last go round wouldn't make it the next time.

I'm not sure about your P&L, but mine doesn't say anything at all about production standards being a part of the bonus system.  It's dependant upon the firm's profitability and my office profitability.  If you're concerned about meeting expectations, then bonuses aren't even on your radar.  So that's kind of a moot point. 

C.  The only thing that I'm aware of in our company that is based on our 12 month production is LP (every 3-4 years) and production awards (snapshot  in Dec to know which plaque to give you).  Bonuses are based on trimesters (4 months).  Segments are based on the 4 month rolling average.  That's about the only things that production really affects.   

I don't really think it matters that much what barometer they use.  Certainly a 6 or 12 month rolling average would be smoother than a 4.  But that means that problems are as easily spotted as they would be with a shorter average.  I have been below expectations in my career.  I've also had some monster months.  Those monster months have a tendancy to mask your poor performance.  Even in the 4 month cycle you could have a $40K month followed by three $10K months and you'd still be meeting expectations for 4 whole months.  Nobody is going to notice that.  At least at the end of that 4th month you hit the radar screen and possibly get some help from your region.  It's not a perfect system either, but I think it's a nice middle ground approach between month to month numbers and 12 months numbers. 

D. I don't think it makes sense to create a bunch of different production charts for all the different scenarios that FAs find themselves in.  Obviously a guy who just took over a $40 mil book is going to have an easier time of it than a new/new.  That's just the luck of the draw.  Life isn't fair, get over it.  10 years down the road it won't really matter. 

Charts aren't supposed to be beneficial to the financial advisor.  The only thing I get from my chart is a good feeling or a bad feeling depending on where my dot it.  That's it.  They're a yardstick we use to see how we're doing compared to what the firm wants.  Charts are indifferent to your success or failure.  So, if you thought that Jones was going to fix your personal production issues by coming up with a new production chart, then you need some psychiatric help. 

Charts are also indifferent to market conditions.  We're expected to sell enough of something to get our little dot at a certain spot on the chart.  Jones, the company, however is not indifferent to market conditions.  Surely in your region you've got one or two folks that got to work with Jones longer than they should have in 2008 and 2009.  That's because Jones fudged their rules with the charts because of market conditions.  The chart still said you were below expectations.  Jones let you keep your job and try to make your chart look better.   

I'd like to see the charts change more often.  Changing once every ten years isn't great.  If two years from now inflation is running rampant and it costs more money to run a Jones office, it makes sense to me for Jones to calculate average profitability for an office and adjust the chart up according.  It might be a small 1-2% jump, but that would be easier to swallow than a 22% jump over two years.     

I guess one of the side benefits of being independent is that I don't have everyone in my region knowing what I grossed last month. In my old region at EJ, there was one guy who wasn't on the leadership team who charted everyone's gross every month and would call you to tell you what you grossed last month. I am sure that most every region has a guy like that. He ended up becoming a wholesaler, shocking huh?

When you are an employee you have to depend on the employer being sympathetic to your situation to bend the rule. It is just better not to have to depend on that sympathy and control your own destiny. I think the desired effect may happen but also an unintended result may happen as well.

ghgr - I type really fast. 

noggin - that's true.  I'm sure we're going to have some guys jump from Jones to indy.  Especially once the new standards kick in.  We've got a lot of Seg 3 guys who are very happy producing $22-$25K a month, never hitting Seg 4 who may feel pressured by Jones to raise their production.  My guess is they'll either embrace Advisory Solutions, or go somewhere where they don't feel pressured to do anything besides show up.  Like you, evidently. 

Wow, this thread got pretty heavy....

Few observations:

1. I think the purpose behind this is to really impact the true "slackers", not the guys that are on a slow, upward trajectory.

2. This will now force people to plan and have some real purpose behind their business, not just come to work and, erhh, post nonsene on forums all day.  With some real business planning, the goals are very achievable, and they now give you MORE time early in your career to hit them.

3. I truly believe Jones MUST place more focus on business development training.  They have done a good job of training the troops to sell and open new accounts, but as I look around my region, I see a lot of guys out 10-15 years, and you KNOW that their busines looks something like this:

Can-sell-date 1998, $60mm AUM, 700 households, mostly A share funds, bonds and a smattering of stocks/annuities/CD's.  They get $8,000 in trails, plus another few grand in DCA and maturing bonds.  They come to work at 10:00, leave at 4:00, and don't do much in between other than answer a few calls.  So they call a few clients, sell a few bonds, a few stocks, maybe get a rollover or referral here and there.  So most months, they are doing $20-25K just by the seat of their pants, without much of a real plan.

Jones built this, now they must deal with it.  These people did as they were told, now they are burnt out, and not producing a whole lot.  Jones needs to do a better job of telling people to annuitize some business or how to otherwise get clients to pay for their services and advice.  Instead they tip-toe around the elehpant in the room (namely, "how the fukc do I do that much gross when I have no assets that produce any revenue and all my clients are retired?") and masquerade this whole thing as "we are finding new ways to better serve our clients and provide world-class service, blah, blah, blah".  Just come out and fukcing say it !  You need to annuitize your business!  Stop with the back-room winks from veterans and outline a plan, in writing, to help the veterans that YOU created generate more income.

I think Jones did the right thing, I just think they owe it to their veterans to give them a better track to run on.

[quote=B24]

Wow, this thread got pretty heavy....

Few observations:

1. I think the purpose behind this is to really impact the true "slackers", not the guys that are on a slow, upward trajectory.

2. This will now force people to plan and have some real purpose behind their business, not just come to work and, erhh, post nonsene on forums all day.  With some real business planning, the goals are very achievable, and they now give you MORE time early in your career to hit them.

3. I truly believe Jones MUST place more focus on business development training.  They have done a good job of training the troops to sell and open new accounts, but as I look around my region, I see a lot of guys out 10-15 years, and you KNOW that their busines looks something like this:

Can-sell-date 1998, $60mm AUM, 700 households, mostly A share funds, bonds and a smattering of stocks/annuities/CD's.  They get $8,000 in trails, plus another few grand in DCA and maturing bonds.  They come to work at 10:00, leave at 4:00, and don't do much in between other than answer a few calls.  So they call a few clients, sell a few bonds, a few stocks, maybe get a rollover or referral here and there.  So most months, they are doing $20-25K just by the seat of their pants, without much of a real plan.

Jones built this, now they must deal with it.  These people did as they were told, now they are burnt out, and not producing a whole lot.  Jones needs to do a better job of telling people to annuitize some business or how to otherwise get clients to pay for their services and advice.  Instead they tip-toe around the elehpant in the room (namely, "how the fukc do I do that much gross when I have no assets that produce any revenue and all my clients are retired?") and masquerade this whole thing as "we are finding new ways to better serve our clients and provide world-class service, blah, blah, blah".  Just come out and fukcing say it !  You need to annuitize your business!  Stop with the back-room winks from veterans and outline a plan, in writing, to help the veterans that YOU created generate more income.

I think Jones did the right thing, I just think they owe it to their veterans to give them a better track to run on.

[/quote]

I bet Ayatollah Bachmann has been eating crow breakfast, lunch, and dinner since Weddle came along

[quote=Spaceman Spiff]

ghgr - I type really fast. 

noggin - that's true.  I'm sure we're going to have some guys jump from Jones to indy.  Especially once the new standards kick in.  We've got a lot of Seg 3 guys who are very happy producing $22-$25K a month, never hitting Seg 4 who may feel pressured by Jones to raise their production.  My guess is they'll either embrace Advisory Solutions, or go somewhere where they don't feel pressured to do anything besides show up.  Like you, evidently. 

[/quote]

Good one Spiff. After you have built a business why shouldn't you have say 200 HH at an average of 200K that gives you 40 Mill AUM. Say you average 80 BPS on that so you have 320,000 gross. That sounds about ideal to me. As an Indy when I get to that level I will make over 200K on that business. I personally don't need a RL or a development leader to get me going, my motivation is from the inside.

BTW, that seg 3 guy and what he was producing are right at what i was doing at Jones. I guess I made the right decison to leave when I did.

Certainly we all agree that giving it a little harder to some of these "vets" is a good thing for the firm.

Spiff - I myself have dealt with excempt and yes it now has to be you with the medical issue to qualify. And you have to miss 3 consecutive weeks at work to qualify as well. My real issue is that I hate having them dictate so strictly on this 4 month target. Basically the new rule is make at the very least 88K gross every 4 months or you will be fired.

I don't know where you are in your business but the scary part is that I saw those numbers drop in 08/beginning 09 and I can't believe that I am still hanging their sign sometimes due to the idea that they have the right to replace me if that situation presents itself again.

B24 - Great post. Agree wholeheartingly. However I have to point at that there is not more time granted to reach the same levels ... still like 4.5 yrs to 18K and then 6.3 yrs now to 22K. Whereas before it just ended at 18K. I actually got pissed when they acted like they were "giving" people more time.

Me currently, I figuered out that I NEEDED to annuitize my business about 3.5 yrs out but I am still in that transition, my concern is now I really really have to balance those two b/c at Ejones if you built that 60 mil book on A shares you are going to be in trouble although you got your little awards all the way up... Last thing is that I believe for me this is another set back in trying to be better at what I actually do (giving financial advice) this is just more time that I have to be on the phones/ hittin the doors instead of looking at duration and standard deviation for my 400 clients.

RW,

I guess I am confused about your identity.  I thought you left Jones several years ago.  I must have you confused with someone else.  Did you formerly post under a different name?

And FWIW, I agree, I still think the expectations ramp up pretty quickly in the early years.  I did a $5mm GK (actually 4.5), but in reality it didn't turn into a whole lot.  But my expectations are like $2K higher than a new/new.  Now, the GK definitely did help me.  But not $2K per month in perpetuity.  I am out a little over 4 years, and my MINIMUM is like $16K per month.  Meeting standards is like $22K.  If I had been gathering annuitized biz all along the way (other than a million or so in C shares), rather than just recently with Advisory, I could already be close to hitting the minimum just on my advisory fees alone.  Instead, I have to balance adding advisory business with commissions in order to hit my numbers AND feed my family.

Spiff,

I too was unclear on that.  I think, basically, as long as you are profitable (bonus eligible profit, not just location margin positive), it doesn't matter.  So if break-even for your office is 10K gross, you could get away with less than 22K.  If, however, you make the 22K and are not profitable, I THINK you are OK.  My break-even is somewhere around 15-17K, so no worries, but I would be curious.  That would suck to do 22K and not be profitable??  I doubt there are many in that situation.  I can't imagine having expenses so high that you can't make a profit at 22K.  One would think you would be in a very wealthy, expensive area.  I have an EDJ friend that works in the Fairfield region of CT (cha-ching), and if a new account for him is less than 500K it is a disappointment.  So it should all be relative.

b24- no never posted under another name and been with only Jones.

I am a little surprised that they just kind of plopped this thing down. I mean we have meetings to discuss what CAIBX is why not have a meeting on how much production they expect from us.... or what would be really interesting to have a meeting about what the hell your P&L really says LOL

[quote=Spaceman Spiff]

[/quote]

I am on our region's leadership team, and the way I understand the PIP is this, if you are under the $22k, but your office is profitable, then you are exempt from being placed on the PIP. If you are hitting the $22k, but your office is not profitable due to being in a high cost area, you will not be placed on the PIP, because you are doing the $22k.  If you have a certain length of tenure (can't remember how long), it exempts you as well. I don't agree with either of those exemptions. I do believe it was high time for EDJ to tighten their standards, and require more accountability out of their FA's, especially those who have been in the field underachieving for an extended period of time.

What does PIP stand for?

"performance improvement plan" aka do this or you're canned

239 months is the magic number to be exempt from a PIP.  I'm not sure I really understand why at 20 years in the biz suddenly it doesn't matter what your performance numbers are.  We've got a guy in our region who is about a year away from that right now and he is the poster child for the reason Jones needed to make a change.  If I've been at this desk for 20 years and I've only got $50mil AUM and I'm grossing under $300K a year someone needs to tell me to move on. 

Performance Improvement Plan.

Is the 22k for both Canada and US?

cnuk

Spiff, it's interesting that you say that.  I just did some quick math.  In order to hit the new "league minimum" of 22K, you would need approximately 50-55mm AUM at a velocity of 0.5%.  I use 0.5% for velocity, as that seems about accurate for a typical "mature" practice that is not all wrapped and not adding lots of new assets.  So you have to consider a few things in that situation:

1. Add more assets

2. Increase your velocity

3. Add other products (i.e. LTC, Life, DI, etc.)

In addition, another component of being "profitable" includes other non-commission products which give you credit on your P&L (i.e. credit cards, mortgages, total AUM for the holding credit from revenue sharing, IRA and other fees, etc.).  So I actually think it is fair to exempt people under 22K per month, because they are creating profit for Jones either through low overhead, additional non-commission products, or a combo of both.

I don't disagree.  If you are making a profit for the firm, the last thing I think they'd want to do is let you go. 

My point was more that if I spend that much time in this business and I don't ever get to the point where I'm bringing home $200K+, then I need to find a new line of work.  A doc I know said that her nurse anesthitist makes close to that.  I volunteered to put her patients to sleep for half of that.  I have lots of unread prospectuses in my office. 

Good point.  Although for a lot of 2nd-career guys, making 100K, working 20-30 hours per week doing something fairly low-pressure is a pretty good gig.  Most of the FA's out 20+ years that are low producers are older and at the end of their working years.  I could do this well into my 60's and be perfectly content making 100K and not working much, staying out of my wife's hair, and not tapping my retirement funds.

The whole message when I was there was when you are profitable it just doesn't matter....If you want to come in 2-3 days a week...ok. I can see where some of the guys that are out 15-20 years who are late 50's early 60's who are stroking a 20K a month without doing much are not going to like being put on a PIP. Maybe because they are profitable they will avoid it but ultimately you have to understand who owns the business and that is Jones......It is certainly their right to want more profit from each and every FA...

[quote=noggin]

The whole message when I was there was when you are profitable it just doesn't matter....If you want to come in 2-3 days a week...ok. I can see where some of the guys that are out 15-20 years who are late 50's early 60's who are stroking a 20K a month without doing much are not going to like being put on a PIP. Maybe because they are profitable they will avoid it but ultimately you have to understand who owns the business and that is Jones......It is certainly their right to want more profit from each and every FA...

[/quote]

I agree.  As we said, as long as the office is profitable, you are exempt from the PIP plan.  So if you live in Idaho, have $500 in rent and pay a BOA $9/hr. to come in 25 hours a week, you will likely be profitable at 12-15K.  In that case they will leave you alone.  The standards don't change whether you are profitable or not, they just indicate the minimum if you ARE NOT profitable. 

B24 and Spiff - The one thing about any situation at jones is that we can justify why they are making this change. However to me it doesn't change the underlying issues. First their level was 15, then 18, now 22.... To me it seems like a never ending slope.

Follow me here, I have been thinking of home office almost like our federal government. They both take their taxes out multiple ways and continue to ask for more "taxes" from us.

I however don't have a problem paying taxes, it is a benefit that an Indy or Nigerian doesn't have... however when my taxes go towards redoing Rt 56 each summer just so Billy and Bobby can have a job I get pissed. Likewise when my Jones taxes go up and are justified by Relationship manager, Development Leaders and "business inflation" I get pissed. I mean what should 5750 per month buy someone?

My problem is that I think going INDY is possible if I had 30 million book and thought I could take 15 but I don't yet. However when I actually get there, I probably won't go Indy b/c it will take too much effort. Please no bashing on that, has anyone felt the same way?

RW,

I see your point, but it's sort of misguided.  Increasing the minimum is not adding a "tax.  It is increasing your production at the same time.  To be honest, the number probably should have been closer to 20K for many years, they just never changed it.  Yes, they went to 18K briefly a few years back, but it had been 15K for like a decade.  The fact is, at 18K, most offices might be making money for the office, but honestly, that puts nothing in Jones' pocket.  Not that I am defending Jones, but as a business owner, I completely see their point.  WTF would I want the cost and compliance liability of 5000 offices that add no profit to the firm?  And all the big producers are basically subsidizing the unprofitable producers.

Your "tax" to Jones has never gone up.  It's basically stayed the same (60% more or less).  Asking you to produce more is not taxing you.  It's funny how everyone has always busted on Jones for their low hurdles, and now that they have raised the bar, everyone is all up in arms.  Again, Jones can't win no matter what they do.

And FWIW, this will not affect the newer people (under 5-7 years), as the bar is the same.  It will only REALLY affect veterans that are real low producers.  Honestly, do you think 22K is too much to ask from someone out 10 years?  And the Performance Plan for vets does not even go up to 20K until 2012, and 22K in 2013.  So it's not like this thing kicks in tomorrow (or even next year).  This gives veterans PLENTY of time to ramp up production to 22K.  I mean seriously, what's the delta ona veteran to get up to 22K consistently?  If you were 10 years out and producing 16 or 17K, your only netting 75K or so, so you're not doing very well to begin with.  But let's say you need to increase your monhtly production by 5K to egt to 22K.  That would require putting $6mm into Advisory Solutions.  Don't you think between now and 2013, you could find $6mm to put into Advisory?  I am 4 years out, and I am getting close to that.  It's not a monumental task.

I think everyone is over-thinking this thing.

I'm with you.  I spent some time yesterday looking at my P&L statement.  I don't look at the direct expenses very often because I don't control them.  But when I do, it just raises a bunch of questions.  For instance, we pay $675 a month for data.  What data?  Then we pay $75 a month for terminal and software.  Then we pay $75 for video and voice.  I'm still trying to figure out the voice part of that because there's a separate line item for the phones.  Then there's the nebulous "other equipment" at $50.  I'm guessing that's the check scanner.  Finally, unless there are other additional equipment, quotes, and access charges, there's market data and quotes at $60 and $65 (per user with real time quotes) respectively.  In my office there's an extra $50 a month for "other equipment" but I'm not sure I know what other equipment I have that costs $50 a month.  I'm going to have to call on that one.  

All that comes out to $1000 a month.  12,000 offices.  12 months in a year.  That's $144,000,000.  Really?  Do you think Jones is depreciating our technology assets?  My BOA said that it was stupid if they are depreciating the assets and making me lease them on a monthly basis.   

My point with all that was if they are now going to use profitability as a measuring stick, how about they work on making my office more profitable from their end too.  I can work to make my commissions go up, but I can't do much in the way of technology expenses, telephone contracts, etc.  

It's not enough to make me jump to the indy side of the biz, but I can see where a lot of folks might decide they can control their own costs better than EDJ can.     

B - we are way overthinking this thing.  But they've killed this forum with the changes so this is one of only two or three worthwhile things to discuss on here at the moment. 

Spiff,

I agree, the tech charges are a bit absurd.  Sometimes I wonder if there is corporate overhead buried in there.  I realize we pay for a LOT of systems.  The problem is, they basically have to provide everything to everyone, regardless of whether they use it or not:

Server, Phones, High-Speed Internet, PC's, Fax/Scanner, color laser pritner, in-fax system, CRM, Cost-basis system (outside vendor), Morningstar, Portfolio, FAST, order-entry, real-time quotes, Bondnet, document scanning/storage, streaming video on demand, etc....the list goes on and on.  I don't want to debate the value or quality of each system, but the bottom line is that there is likely some sort of per-user charge for each of these systems, as MOST are 3rd party systems (or have 3rd party components in them).  They also have national contracts for onsite systems support.  Problem is, they must provide them and charge EVERY FA, regardless of how much they use them.  For most FA's, they could find less expensive or free alternatives to some of these (or not use them at all) if they were indy.  But huge firms like Jones need services with scale and durability.  So we end up paying the price.  It's sort of counterintuitive, as you would think a huge firm would have economies of scale, which they do, but they end up having to find more systems that are more robust than any one individual might require.

Gentlemen, is that a light bulb I see above your head?

The answer from any employee-model firm about lack of profitability is always to have the broker/advisor generate more revenue.  If you talked to 75-80% of self employed people and told them you were the prinicpal of a business that generated $200,000 of revenue, they would think you were hot sh**.  This business does NOT have to have a ton of overhead, unless someone else makes the decisions for you.

How many FAs out a year or less need their own full-time assistant?  Shoot, how many with less than $50 million AUM do?

Cowboy-

Tell a Jones FA they don't need a full time assistant unitl you hit the 50M number is taboo. They are not equipped to think like that. They are generally told what to say, and typically aren't interested especially if they aren't profitable. Guess what? Apparently they are going to have to become more oriented like a true business owner, but I have a sneakin feeling they aren't going to be able to affect the bottom line, just the revenue side.

True statements.  I hired a part-time BOA.  She works about 25-30 hours per week, gets no vacation, sick, or benefits.  She costs $1500-2000 per month.  I tell other FA's that she is part time and they look at me like I'm on drugs.  I have no reason to have her here full-time.  And she also covers my Legacy FA as well.  So only half her cost hits my P&L (about $800-1000 per month).  Between the two of us (I am out 4 years, he is out 2) we have about $35mm AUM and 300 clients.  We don't even bring in an on-call when she's out unless we see that we both have a few appointements that day.  If one of us is free, they answer the phone.

This is why I still insist that we don't all need one FT BOA, nor do we each need our own office.  We scan all our documents, we have e-mail, we have multi-buy mutual fund purchasing, we have Advisory Solutions which is turn-key, pretty soon they are rolling out this portfolio builder tool which will build portfolios and then buy them all with a click of a button, etc.  All firms have this stuff, and the point is, it makes doing a lot of the daily admin stuff easier to do yourself than giving to an assistant.  Granted, if you have a very transactional business with lots of clients, you need one.  But there are very few offices I have seen where you cold not have one BOA for two FA's (and one office).  I am still convinced that the two-FA office works.

HOWEVER, I was recently audited, and the auditor was telling me that it is a compliance issue.  Not sure if TWO FA's is an issue, or just more than that.  It jsut seems that we could cut way down on office overhead by reducing offices and BOA's.

It is just the math of things that I currently don't understand. Also I feel like an idiot for not understanding it. Since we are compensated based on this P&L I think Jones should take a lot of time to make sure that I understand it, however I have never been explained these things and I sincerely feel that my RL and AL either are not prepared to talk about it, don't understand it themselves, or are hiding something.

As far as the two person office, I couldn't agree more. I however do a ton of transactional so I really do LIKE having a full time BOA. That isn't a huge part of the problem for me. The depreciated and leasing of technology... That thing is insane, then add 5750 per month for ????

I know that some indys who hate Jones are probably getting hardons just reading our banter here, but I am glad to have an open conversation about what we are paying for.

As far as the expectations, I do agree. I am not against the concept. I however am fearful of Edward Jones trumping up more overhead costs into things like TEch depreciation making profitability a number that is so absurd. It isn't like we are producing widgets here, there is no manufacturing costs. The only thing we provide is investments and service both of which have no upfront costs. That is why I find it so hard to believe that we need to be producing 22K to really be profitable and even if our number is 16K... is that really realistically the true profitablity number? If so, what is our home office doing wrong? Again like the govt and taxes, they get tons of tax money but it is never enough...

RW,

Maybe it's because my background is in management accounting that ity makes sense to me....to me the P&Lm is pretty simple and straight forward.  The ONLY numbers that don't make sense to me are the tech numbers, because they are not itemized (or rather, there's no real way to verify their origin).  Everything else is straight forward - wages, benefits, rent, utilities, buildout amortization, etc.  I have verified every single number, every month.  Anything that seems wrong to me, I always shoot a Service request to Accounting, and the clarify it.  I have had to verify maybe 3 things in the few years I have been in this office, and they awlays end up making sense.

As far as the true "profit" number, keep in mind that there are a few different numbers we are talking about here (3, more specifically):

1. The $22K threshold - this is not the ACTUAL profit break-even number per branch, it is more of an average firm-wide for a branch to be profitable to the firm (NOT just branch profitable), so that represents what the firm wants each advisor to produce, minimum.

2. Location Margin - If this number is positive, it means you are covering the costs associated with running YOUR branch.  This would include your compensation (40%), your BOA, benefits, rent, utilities, buildout costs, technology costs, phone, etc.

3.  Bonus Eligible Profit - If this number is positive, it means that you are covering the costs of your branch (i.e. Positive Location Margin), PLUS you are making a positive profit contribution to the FIRM.  The firm estimates that each branch must contribute $69,000 per year in profit to the firm in order to cover home-office expenses.  So if my branch only contributes $50,000, that means some other branch must contribute $87,000 to make up the shortfall.  If every branch was contributing $69,000+, it would mean more profit to be allocated out, and the bigger producers would not be subsidizing the poor producers.

As far as home-office overhead, unfortunately, we are not much different than most firms.  And having 10,000 offices for 12,000+ FA's creates additional overhead requirements.  To compare, I think I read that MSSB has like 750 offices, but like 15,000 FA's (or more).  It's just a fact of life in our structure. 

Hope this clarifies SOME things for you.  Doesn't take the bite off, though.

B24- thanks but doesnt it seem like it is a bit high that it takes 264,000 for a branch that doesn't produce anything to be PROFITABLE. What I am saying is that we only get paid 103000 of that our help like 30000 of that. Our computer system is nothing above and beyond, quote system etc.I think that the math on the P &L stinks again, like spiff said technology going for like 1 million per year and then charging to depreciation... I just feel like something doesn;t add up

RW,

Of 264,000, you get paid 103,000, so now you are down to 160,000.  You have benefits, which includes 7.65%FICA, Medical, etc., call it 10%.  Now you're down to 150,000.  You pay your BOA $35,000 with FICA included.  Jones pays profit sharing, which would be about $6500 for all wages (yours and hers).  You're now down to 120,000.  You pay rent, utilities, phone, etc.  Call it $2000 per month (mine is higher).  Your down to 95,000.  You amortize buildout costs.  Call it $500 per month (mine is higher).  You're down to $90,000 (yes, I'm rounding with most of this stuff).  Branch systems/equipment is $15,000 (to pay for all PCs, printers, phones, cables, servers, etc., in addition to all the software the firm uses - I will touch on this again later).  You're now down to 75,000.  I did not include any miscellaneous stuff, and I rounded down on most everything.  So you are now at your $69,000 that Jones wants in profit contribution to cover Home Office overhead.

RW, I'm not defending Jones, I am just telling you that the numebrs all add up.  You can criticize them for their home office overhead, but the P&L DOES make sense.  And look at it this way, it's a partnership, so WHY would the PARTNERS want more home office overhead than necessary??  Most of the added profit by reducing overhead would go in their pockets, so they have a LOT of incentive to keep overhead low.

The fact is, Jones has a high-overhead model.  They don't try to hide it.  It just is what it is.

And getting back to the tech stuff, if you really add up all the hardware and outside software we have to lease every year (most enterprise software is paid on subscription basis), it really is expensive.  Morningstar Principia alone (which is what we have) is like $3000/yr. per user.  There's like 10+ sofwtare programs we use that we msut pay for every month (Sungard Financial Planning (FAST), Portfolio, Cost Basis (Net Worth Services, Inc.), Document File Cabinet, In-Fax System, Outlook web access, Video On-Demand, Advisor Learnings Site, S&P Marketscope, Quote Monitor, BondNet, Intercom, Webdial, Relationship Manager, Advisory Solutions, etc.).  Yes, believe it or not, these are all 3rd party systems.  Some may only cost $50/mo. per user, but they all cost money.  Again, I am not going to validate their usefulness, but the fact is that these are the systems they choose to use, and most other captive firms use something similar.

[quote=Spaceman Spiff]

239 months is the magic number to be exempt from a PIP.  I'm not sure I really understand why at 20 years in the biz suddenly it doesn't matter what your performance numbers are.  We've got a guy in our region who is about a year away from that right now and he is the poster child for the reason Jones needed to make a change.  If I've been at this desk for 20 years and I've only got $50mil AUM and I'm grossing under $300K a year someone needs to tell me to move on. 

[/quote]

Why? If he is serving his clients. Making a living for him and his family. Why should he climb the wall of greed?

Or is it because the firm profit comes first and then the reps and last but not least the clients?   

Does firm profit come first?  Of course fukcnut.  If you ran an indy shop and were LOSING money, what would YOU do?  The client has nothing to do with it.  You can serve clients well whether you are profitable or not. 

It is just idiotic to criticize a firm for mandating a profitable branch office.

And the firm profit does not come before the rep, since they are essentially one and the same.  If the firm is profitable, it means the rep made good money.  How dumb are you?

b24,

first time in a long time I agree with you.  In fact this may be the first time.  I really like your reason in this particular case.  If it ain't profitable cut it out like a cancer lest it spreads to other parts of the body.

Your firm did it with the UK, it wasn't profitable after 10 years so it was closed.

So when will your firm see the light with Canada?  16 years and NEVER been profitable.

The operations there is barely into Quebec.  Montreal metro area has nearly 4 million population and how many EJ people are there????? 12 maybe   some would argue poor management but that can't be as  the managing partner of Canada must be really good because he's the second highest compensated person at EJ. (as per the 10-K)

X-

IF B24 was the managing general partner,  Spiff would have been fired for too many posts. It isn't profitable to spend alot of time on these forums....

Sorry Spiff...couldn't resist. It was meant for a little brevity, honest.

[quote=Spaceman Spiff]

I don't disagree.  If you are making a profit for the firm, the last thing I think they'd want to do is let you go. 

My point was more that if I spend that much time in this business and I don't ever get to the point where I'm bringing home $200K+, then I need to find a new line of work.  A doc I know said that her nurse anesthetist makes close to that.  I volunteered to put her patients to sleep for half of that.  I have lots of unread prospectuses in my office. 

[/quote] Ok suppose you are bringing home 150k or even 100k, what do you suggest as another career choice? The characteristics to make it in this business, even at the lowest levels, do not transfer to other industries very well. I am basing this on a dollar for dollar transfer. For example, if a Jones guy is out 10 years and is "barely" getting by in the GP/LP's eyes, where could they go and have what I would consider an apples to apples comparison opportunity?

foot - funny.  However, if you look at an average post per day on B24's vs mine, then he'd have to let  himself go first. 

ND - The job skills we have don't translate very well outside of this industry.  I agree with you on that.  But if I add another 10 years to my career here at Jones and I'm not producing substantially more than I am right now, I really should consider some alternatives.  I would seriously look at getting some different education and trying a different line of employment.  What that is, I'm not sure.   My wife asks me that question every once in a while and I never have a good answer for her, so I just keep doing this.  I consider starting my own blog about the financial industry, but who wants to read my opinions about how everyone in the world, except for EDJ, sucks?

[quote=xej1984]

b24,

first time in a long time I agree with you.  In fact this may be the first time.  I really like your reason in this particular case.  If it ain't profitable cut it out like a cancer lest it spreads to other parts of the body.

Your firm did it with the UK, it wasn't profitable after 10 years so it was closed.

So when will your firm see the light with Canada?  16 years and NEVER been profitable.

The operations there is barely into Quebec.  Montreal metro area has nearly 4 million population and how many EJ people are there????? 12 maybe   some would argue poor management but that can't be as  the managing partner of Canada must be really good because he's the second highest compensated person at EJ. (as per the 10-K)

[/quote]

Well, as I said in a post somewhere else about Canada, the fact that they nixed the UK means that they must have something up their sleaves for Canada.  In a nutshell, they either have a real good gameplan for profitability, or they are formulating the right exit strategy.  Selling a financial services firm with $14B in AUM is no small task.

As I also said, keeping the thing going may lose LESS money than trying to close it/sell it.  They have narrowed the operating losses considerably.  It's sort of like dropping out of a marathon at mile 24 with a mild muscle cramp.  I think the UK was more like getting diahrrea at mile 15. 

Of course, I may be WAY off on this, but from a business perspective, these are the type of things we used to look at when evaluating deals (internal or external) in my previous life.

I guess that even if those numbers do add  up I find it unreasonable that it would cost every office 70K each year in payment to Edward Jones. That doesn't sound high cost it sounds ignorant as a business plan.

B24- I read what you said about doing something different and I have to agree with everything you said.

[quote=RealWorld]

I guess that even if those numbers do add  up I find it unreasonable that it would cost every office 70K each year in payment to Edward Jones. That doesn't sound high cost it sounds ignorant as a business plan.

B24- I read what you said about doing something different and I have to agree with everything you said.

[/quote]

RW, honestly, it doesn't sound high if you consider that it includes rent, buildout, and your assistant's wages and benefits.  What DOES sound high is when you're producing 400-500K and you're paying 240-300K to Jones.  I actually think it's the best place to be if you are producing under 300K and need to have an assistant, and possibly live in a high-rent area.  If you could hire someone for 25-30 hours at $15/hr., and pay rent of 500 bucks, then maybe it would be better to go indy at any point.  It also depends big time on your B/D payout as an indy.  One of my friends that went indy through Cambridge gets a 65% payout (I think his OSJ takes a cut) because he only produces like 125K.  He can only afford to work out of his house, without an assistant.  So his take-home is about the same as at was at Jones (he has some other expenses in adition to the B/D payout).  If he was producing 250K and had an 85% payout, then being indy would be a no-brainer. 

[quote=RealWorld]

.... Our computer system is nothing above ....[/quote]

You don't know what you are talking about. For the costs you are paying in software, I'd challenge you to duplicate it in the real world. You either don't use it or don't know it's there.

Go indy, figure it out afterwards. You'll be a little surprised at what tech costs and how tough it is to integrate them.

RW, he's got a point that you are overlooking.  Jones' systems are VERY well integrated.  Yes, you could by a CRM, a portfolio system, and order entry system, a document file cabinet, financial planning software, etc. from 3rd party vendors, and possibly pay less.  And you could possibly get better software as well.  But try getting them to all talk seamlessly to each other.  Now THAT is another story.

Lock, what has been your experience with the tech side of things since going indy?

As a starting point, I clear through Pershing. If what you want is to get the integration you ahve at Jones, RJ, a wirehouse, Cambridge ... well, that's tough. You need a central hub, and that tends to force you towards Redtail for CRM. It will hook with other tools pretty well, do the mailmerge thing, get a good coordination with a strong, client facing tool.

So I'm looking at using Redtail (65), plus financelogix (think eMoney, what the LPL guys have) for 110 - and that includes six CashEdge connections, plus Albridge (225). That's functional without completely all the bells and whistles of Jones. Which of course, I don't need as you well know. Morningstar Principia type analysis is available for free at ishares (and actually, you can get some very good additional tools not available). And the CashEdge connection again is something I didn't have at Jones.

So, I'm at $400 a month before the cost of website.

Thanks.

Good info and you are right I literally know nothing about computer systems. I still believe that paying 1000 a month for the phone system (not bill), computers, quotes, etc has to be really really expensive.

I mean with 12000 branches that is 12 million a year...

[quote=Spaceman Spiff]

I'm with you.  I spent some time yesterday looking at my P&L statement.  I don't look at the direct expenses very often because I don't control them.  But when I do, it just raises a bunch of questions.  For instance, we pay $675 a month for data.  What data?  Then we pay $75 a month for terminal and software.  Then we pay $75 for video and voice.  I'm still trying to figure out the voice part of that because there's a separate line item for the phones.  Then there's the nebulous "other equipment" at $50.  I'm guessing that's the check scanner.  Finally, unless there are other additional equipment, quotes, and access charges, there's market data and quotes at $60 and $65 (per user with real time quotes) respectively.  In my office there's an extra $50 a month for "other equipment" but I'm not sure I know what other equipment I have that costs $50 a month.  I'm going to have to call on that one.  

All that comes out to $1000 a month.  12,000 offices.  12 months in a year.  That's $144,000,000.  Really?  Do you think Jones is depreciating our technology assets?  My BOA said that it was stupid if they are depreciating the assets and making me lease them on a monthly basis.   

My point with all that was if they are now going to use profitability as a measuring stick, how about they work on making my office more profitable from their end too.  I can work to make my commissions go up, but I can't do much in the way of technology expenses, telephone contracts, etc.  

It's not enough to make me jump to the indy side of the biz, but I can see where a lot of folks might decide they can control their own costs better than EDJ can.     

[/quote] I think that Spiff is really on to something here...If jones bought those assets and depreciates them...Holy Cow!!!  Getting taken advantage of... Hmmm... 100,000,000 in technology purchases....just for math sakes

Gets depreciated at 20% first yr and 32% the second $52,000,000 in the first two years... How I would love to see an audited cash flow statement in detail from jones along with the tax return with all schedules. I am not a CPA but I wonder if there are two sets of financial communications to the LP's and then a different set to the IRS...and GP's like I said in the other thread it is not an environment where asking "real" questions is encouraged and when you do...you are made to look like the jerk or even better the naysayer.

JLC,

To be honest, I think the majority of our tech costs are associated with annual licensing and subscriptions to various 3rd party tech services.  I think people over-analyze things sometimes with regards to Jones.  I am not in the mood to go back through the tech stuff right now, but if you add up all the 3rd party software we use, it is pretty impressive.  I think last I counted, we had at least 10 3rd party platforms we utilize at the branch level.  And that does not include any of the "embedded" systems that we use and don't really see.

Don't forget, it also includes telephone systems, hardware (PC's, monitors, color photocopier, scanner/printer/fax, server, etc.) high-speed internet, video on demand, on-site systems support, etc.  This is in addition to all of the software mentioned.

I hear you... I was there long enough to know that there is a shield between GP's and the rest of the people. Every large business has some skeletons in the closet. I have never said that the costs are not justified. Being indy and paying for all of the nickel and dime stuff can be a pain too but in the end it works out better.  My issue is that I don't understand how is getting all of the tax benefits. Where is all of that depreciation going? If it is true that the technology upgrades are leased back to the FA's and the Capital Expenditures are depreciated...that just sucks for the FA. Because the firm gets to write off the capital expense and depreciate it I believe over 5 or 7 years and since it flows through for GP's it creates a loss for tax purposes while possibly having a positive cash flow... Just something to think about?

BTW I heard sugg box is out of control...

JLC,

I think you need to go back to Accounting 101.  First off, the "lease expenses" are not "charged" to the FA.  They are simply allocated to each branch that Jones owns (leases).  That's textbook accounting.  The depreciation is on Jones' books, exactly where it should be.

Depreciation and lease expenses (generally a cash expense) are always tax benefits for the company, not the employee.  Why would a W2 employee receive a tax break for depreciation for equipment?  Do you think Merrill FA's get to write off their desks or computers or telephones?  Then why would they are Jones??

Honestly, this is a weak argument against Jones.  No firm would ever give a W2 employee a tax break on....well...anything.  It just doesn't make sense.

[quote=B24]

JLC,

I think you need to go back to Accounting 101.  First off, the "lease expenses" are not "charged" to the FA.  They are simply allocated to each branch that Jones owns (leases).  That's textbook accounting.  The depreciation is on Jones' books, exactly where it should be.

Depreciation and lease expenses (generally a cash expense) are always tax benefits for the company, not the employee.  Why would a W2 employee receive a tax break for depreciation for equipment?  Do you think Merrill FA's get to write off their desks or computers or telephones?  Then why would they are Jones??

Honestly, this is a weak argument against Jones.  No firm would ever give a W2 employee a tax break on....well...anything.  It just doesn't make sense.

[/quote]

As I said before I am not a CPA or an accountant...just a question. Questions about transparency. I am glad that you understand accounting and I don't think the accounting 101 comment is warranted since it was previously stated....good for you....I hope you feel empowered. Since you know about accounting, then the question is about company tax benefits vs employee tax benefits and the flow through and tax benefits to GP's vs their risk. These are questions I have always had but the longer I am gone the less interest I have in what goes on there..Transparency and communication have always been my issues with jones there is always some mystery out there about the inner-workings of the firm. It reminds me of the movie "The Firm" this lack of transparency and mystery about where I was headed, about how LP was allocated etc...eventually helped drive me out.

JLC- I really agree with what you say about asking questions. I had a GP on the phone the other day and instead of answering my questions the GP made me feel foolish for asking the questions. I then made it aware that I knew my question was not foolish and that I really wanted an answer. The response to that...

"I will leave you with this" says the GP after not answering my quesiton and trying to railroad me into giving up. It was so obvious that the GP was actually TRYING to intimidate me...

I found it sad.

[quote=RealWorld]

JLC- I really agree with what you say about asking questions. I had a GP on the phone the other day and instead of answering my questions the GP made me feel foolish for asking the questions. I then made it aware that I knew my question was not foolish and that I really wanted an answer. The response to that...

"I will leave you with this" says the GP after not answering my quesiton and trying to railroad me into giving up. It was so obvious that the GP was actually TRYING to intimidate me...

I found it sad.

[/quote]

Yeah there have been a few people that have stood up in regionals and have asked questions in front of the group questioning processes or whatever was on their mind...They are supposed to be town hall mtgs and I understand the need to keep things in order but there is certainly a common agenda to keep things fenced in...

Always be careful about what you ask in a regional or town hall meeting. You don't want to be labeled as one of the "others"......

The "others" don't seem to last very long.  We're pretty good at disposing of the bodies and distributing the assets quietly.   

The comment about Regional Meetings that are supposed to be town hall like meetings I find, um, well, laughable.  They're not set up to be town hall meetings at all.  They have very specific, very strict agendas.  Most of which are set by HQ, not the region.  Once in a while you get an Area Leader who is willing to open the floor to general questions, but not very often.  Those meetings are designed to tell you what you need to hear about Jones.  Nothing more.  That's especially true over the last few years when they've shortened the Summer meeting by a day.  We're lucky to get one sales panel that gives us any sort of useful info.  I just looked a the agenda for this year's meeting and nowhere does it imply that our HQ GP will be opening himself up for general questions. 

JLC - how much more transparent do you want Jones to be?  You can go online and read the 10-K yourself.  There's a lot of transparency in that document.  As to the tax questions you evidently still have lingering in your mind, I think the same answer that B24 gave you can be applied to pretty much any tax question you have about Jones.  The firm and the GPs take the big risks.  Therefore they get the big tax breaks.  I, as an FA, don't risk any capital, so I get no tax breaks.   

Not being in the inner sanctum of any company will lead to questions about the workings of the firm.  What obligation does the firm owe you, an employee, to talk about how they choose to run the company?  I'll answer that one.  None.  You're an employee.  Their obligation to you stops at the paycheck they give you. 

With that said, are there questions I'd love to have answers for?  Yep.   Will getting the answers to those questions materially affect me?  Nope.  For instance, I'd really like to know that the GP's average return on their GP dollars has been over the last 10 years.  I'd also really like to know who Conestoga is.  The question is, what do you do with that info after you get it? 

Spaceman makes a lot of good points. As far as what Jones owes each of us, they really have the right to choose how open they are. The GP's run the company. They answer to their management group, not to the individual FA's. And with that in mind, I would suggest we all be careful how much kool-ade we ingest. We don't owe anyone any more than what is in our own best interest to give. That is the way companies treat workers, and that is the way workers should treat companies in return. Nothing personal, just business.

[quote=Spaceman Spiff]

The "others" don't seem to last very long.  We're pretty good at disposing of the bodies and distributing the assets quietly.   

The comment about Regional Meetings that are supposed to be town hall like meetings I find, um, well, laughable.  They're not set up to be town hall meetings at all.  They have very specific, very strict agendas.  Most of which are set by HQ, not the region.  Once in a while you get an Area Leader who is willing to open the floor to general questions, but not very often.  Those meetings are designed to tell you what you need to hear about Jones.  Nothing more.  That's especially true over the last few years when they've shortened the Summer meeting by a day.  We're lucky to get one sales panel that gives us any sort of useful info.  I just looked a the agenda for this year's meeting and nowhere does it imply that our HQ GP will be opening himself up for general questions. 

JLC - how much more transparent do you want Jones to be?  You can go online and read the 10-K yourself.  There's a lot of transparency in that document.  As to the tax questions you evidently still have lingering in your mind, I think the same answer that B24 gave you can be applied to pretty much any tax question you have about Jones.  The firm and the GPs take the big risks.  Therefore they get the big tax breaks.  I, as an FA, don't risk any capital, so I get no tax breaks.   

Not being in the inner sanctum of any company will lead to questions about the workings of the firm.  What obligation does the firm owe you, an employee, to talk about how they choose to run the company?  I'll answer that one.  None.  You're an employee.  Their obligation to you stops at the paycheck they give you. 

With that said, are there questions I'd love to have answers for?  Yep.   Will getting the answers to those questions materially affect me?  Nope.  For instance, I'd really like to know that the GP's average return on their GP dollars has been over the last 10 years.  I'd also really like to know who Conestoga is.  The question is, what do you do with that info after you get it? 

[/quote]

You can't be seriously suggesting that Jones is transparent are you????? I have heard you say some really off the wall statements but that has to be the most laughable one that I have ever read that you have written.....

Both of you are right...I have mentioned before that I have a need for being in control..having unanswered questions is something that I was not happy with at all. Having a 40% payout and being an employee were two things that eventually I was not willing to compromise about. That is why I don't work there. I think for the reasons stated you have come to some solid conclusions about Jones. I don't believe Jones is a bad place for people that carry the same thought process and perspective that you have. We have different goals and aspirations. I wanted the control and you are willing to give some control up for comfort and less stress... There will always be that balancing act at every firm.  A Value proposition just like we do for our clients...no different in many aspects.

What I hear is that you are OK with the arrangement... I actually believed in the company for a long time and when I came the realization that (like navet said) "it's just business no matter what"...I kinda lost it because my reality was crushed. My RL had no power, My AL had no power either...there was someone else pulling the strings...What I thought was not reality...The RL and AL admitted to me that they were puppets... The nails were in the coffin then for me.  I was too trusting...I was too nice of a guy... I felt misled not by those around me (RL other FA's etc) but by the next layer of mgmt who treated me like a number after I gave a decade of my life to the company...

Enough of the dear john... I am much better off now

[quote=noggin] 

You can't be seriously suggesting that Jones is transparent are you????? I have heard you say some really off the wall statements but that has to be the most laughable one that I have ever read that you have written.....

[/quote]

In a way, yes I am.  For the purposes of furthering this discussion, what do you think Jones isn't telling us that would be critical for the average employee to know and understand? 

spaced out one

where does the firm get the koolaid from?

Actually a breakdown of how a branch is profitable and what my expenses really are.  $1000/month for technology why do I pay for a phone, etc. etc  Isn't that coming out of the 60% of the commissions that St.Louis keeps....sounds like double dipping to me.

The Piggly Wiggly I believe.  We order it in bulk. 

The technology breakdown is actually listed in Jonesnet.  It's really difficult to find.  You type in P&L expenses into the search function on Jonesnet and click on the second option.  Ta -Da!  Breakdown of technology expenses.  Now, it's not a line item breakdown, ie $40 a month for SunGard Financial Planning Software, $20 a month for CRM software, $30 a month for licensing for Microsoft software, etc.  However, it's there in general categories.  Would I like to see the entire breakdown?  Sure...once.  

We don't pay our phone bill at Jones any longer.  There is a $50 a month charge for "other equipment" which I'm assuming means my scanner/fax/copier, check scanning machine, printer, server, and the phone sytem.  Which they upgraded recently.  So if that' what you're talking about, I'm not sure how much more transparent you'd like them to be.    

I'm not sure why profitability is such a mystery to you.  It's all there in your P&L statement.  I think the problem is that very few people actually take the time to do any digging into their P&L to figure out how it works. 

OK, the 60% question.  How do  you think Jones pays the vendors that they use for the services that they offer?  Of course they use the 60% that they keep.  Let's think about this one for a moment and go back to the technology comment before.  Remember when you're dealing with software licensing, your often having to do it per user.  That means for the average branch, everything you need has to leased for both the BOA and the FA.  Here are some of the things, not a complete list, that we have access to in our branch that the firm more than likely leases:

Internet access, quote monitor, AnnuityNet, BondNet, FAST (SunGard) planning software, Fax Management software, Microsoft Outlook, S&P research, Morningstar Workstation,  Document Scanning, blah blah blah...

I could keep going.  I've not even scratched the surface.  The point is that when you simply look at the basic tools we are provided, if they have to lease them per user, the costs can add up pretty quickly. 

So, they take the money they pay those vendors out of their 60% cut and then tell us, through the P&L, that they've spent the money.  I do find it interesting that it all adds up to $1000 a month EXACTLY.  Weird, huh. 

Of course out of that 60% they also pay my BOA, all of the HQ people that do the work behind the scenes to make sure I have the time to waste on RR all day, provide benefits, pay my rent, utilities, etc.  All of that gets listed on my P&L.  It's not really all that secretive or mysterious. 

Okay Spiff....

Break down technology charges on a line item basis.

On Annuities explain the difference between what jones collects in commission dollars and what they pay the advisor on.

On Mutual Funds the same thing.

Break down the profit that the fixed income desk makes.....

What the GP and LP and SLP returns are reported quarterly......

hey I'm on a roll. the weekend came early for me so I can afford the time today.

taking from another thread I mentioned that your firm has lost a bit of coin up der in kanada.  over the past decade there were losses in the UK as well.  To close up shop in the UK is going to cost a minimum of $70 Million and north of the 49th it has amount to anywheres between $180 to $360 million and the losses are still coming in.  Although these are for "international lines"  that some of the pro-EJ posters posters would rather look the other way or aren't concerned about these miniscule amounts.  It shows a lack of commitment to success,  prudent due diligence and planning at the very least.  When will this sort of madness end?

You're still at it?

that's right bb i be still at it

[quote=noggin]

Okay Spiff....

Break down technology charges on a line item basis.  - I agree.  I'd like to see this done maybe once a year.  I don't need to see it every month.

On Annuities explain the difference between what jones collects in commission dollars and what they pay the advisor on.  - I think that would be a good thing to see too.  We hear about haircuts all the time.  I do a lot of annuity biz and I'd like to see this info.    

On Mutual Funds the same thing.  - I think this one is already out there.  I also believe it's pretty much industry standards as far as commissions go.  

Break down the profit that the fixed income desk makes.....  - You need to learn how to read the 10-k and 10-q.  That info is listed there.  Broken down by product type.   

What the GP and LP and SLP returns are reported quarterly......  - You can find LP returns on Jonesnet all the way back to 1979.  I'm not sure about SLP.  I haven't tried.  If you really want to know the nitty gritty, you can search for the firm financial pdfs on Jonesnet.  Balance sheet, Income Statement, Partner Profit Summary, etc.  It's there.  Not hidden.  Available for internal use only, but out there for the Jones general public's viewing pleasure.  You can do the math yourself and figure out the profit differences between the three partnership levels.   

They need to raise expectations at Jones so it wouldn't be so embarassing to work there..$180k after 5 years... are you kidding me...?

$180K is the MINIMUM expectation.  Standard at 5 years is $325K.  Huge difference.   

As someone involved in this process, here is the fundamental issue:  Slacking.  The numbers of FA's at EDJ that coast and do not work even close to a 40 hour week is estimated at 60%!  That number is based on an internal survey and when I say not even close, I mean less than 30 hours consistently!  Think about those implications, people had to answer this survey and they still admitted to working three days a week!

As for this "being dropped", it has been mentioned for the past year at every regional, from what I hear.  

Remo - The problem here is running your own business....

Which is FINE if you RUN YOUR OWN BUSINESS!!  You DON'T if you work for someone else!  If you want to be a slacker, go independent!  

It gets tiresome for about 20% of the people to carry the load and have their bonus suffer, their BOA NOT get a raise and the support they get from the home office be effected!  SO, the choice is for the bottom to either pick it up or pack it up OR for the TOP to go get paid!  Let me know a)which segment you are and b)which choice you think EDJ should choose!!

As a recent former Edward Jones financial advisor, I can say that the new performance standards were something that was planned way in advance. A former general partner came to our regional meeting in October 2009 (after chewing out the group about its sales numbers being down, BTW) that the performance standards would be raised.

Edward Jones needs to be honest and tell the truth about it -- it's a forced attrition plan. When Jim Meddle, er, Weddle is telling in his detached voice that he envisions 10 percent of the sales force will be trimmed, the tone for the past two years has been aimed at Segment 3 and Segment 4 financial advisors -- the group that has gross production rolling four-month average ranges from $15,000/mo. (the lowest average to make it into Segment 3) to $39,999/mo. (the highest average before going into Segment 5). It doesn't take much of an assumption to conclude that an even higher percentage of the new FAs and Segment 1 and Segment 2 FAs attrition will not make it.

Despite its "brutal facts" report coming out a few months ago, I believe Edward Jones already has made its five-year plan -- namely, trim its sales force by a large percentage over the next three years and shut down offices. Contrary to the image its pitching to the unassuming public, I don't see the firm wanting to open more offices but actually consolidating its offices via forcing a lot of financial advisors to leave. For that matter, it wouldn't surprise me if the firm as a "nuclear button" plan of putting itself on the auction block in the near future.