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Jul 4, 2006 6:11 pm

[quote=Butkus]

Actually the 10, 15 and 20 year beta's on the fund are 0.59, 0.62 and 0.63 respectively. A recent American Funds "Investors" magazine has an article on active vs passive mgmt, and a hypothetiical illustration compares the American Mutual Fund with the S&P 500 from 1970 to 2000. A $100K in the index grew to $4.8M and in their fund to less than $4.4M. But if the investor started with a 5% distribution, increased annually 5% for inflation, then the ending amounts were $1.2M for their fund and $550K for the index. Through 2005 the ending amounts were $1.7 for their fund and $350K for the index. So volatility was crucially important. As they expressed, the person was eating their seed corn in difficult times.

I am very comfortable using this fund for retirees and showing this illustration. 

[/quote]

What would the figures look like for a fund that had betas in excess of 1.00?

Jul 4, 2006 6:11 pm

[quote=Butkus]Actually the 10, 15 and 20 year beta’s on the fund are 0.59, 0.62 and 0.63 respectively. A recent American Funds “Investors” magazine has an article on active vs passive mgmt, and a hypothetiical illustration compares the American Mutual Fund with the S&P 500 from 1970 to 2000. A $100K in the index grew to $4.8M and in their fund to less than $4.4M. But if the investor started with a 5% distribution, increased annually 5% for inflation, then the ending amounts were $1.2M for their fund and $550K for the index. Through 2005 the ending amounts were $1.7 for their fund and $350K for the index. So volatility was crucially important. As they expressed, the person was eating their seed corn in difficult times.

I am very comfortable using this fund for retirees and showing this illustration.[/quote]

I had a competitor (guess where he was from?!!) use AmFunds with a prospect nearing retirement.  I profiled the prospect and realized how low her risk tolerance was, and then closed the deal with a VA with income and principal guarantees.  She could not have cared less when he insisted that his hypo showed her able to take more in cumulative withdrawals...she just kept asking (with my insistence), "but is it guaranteed?"  Kind of like when his clients try to find out what the final maturity of a high yielding bond and he keeps repeating the call date back to them.

...just understand that this fund presentation doesn't always work, particularly if you have a competitor showing some other alternatives.

Jul 4, 2006 11:21 pm

Congrats on closing the deal, indyone!

And it's probably a blessing in disguise for the other broker. Had he closed the deal instead, he may have ended up in arbitration with your client.

I can hear the pitch put forth by the other broker now: "You want guarantees for your money? I guarantee you'll be happy with this fund! I guarantee I'll provide you with the best service! I guarantee you'll have the best minds on Wall Street working hard to provide you with a more secure future! I guarantee I'll send you a postcard from Tahiti, when I win the trip from selling you this fund! ...Oh, uhhhhh, did I show you this neat graph?  ...Ya know, you remind me of my mother."

Jul 4, 2006 11:54 pm

Tough to see an arbitration brewing as most American Funds are trading at/near their all-time highs.  Compare that to the annuities with their high annual fees and you can bet the ranch that almost any of their funds has absolutely trounced the VA.

Not to say that IndyOne made a poor decision; he sold the client what she wanted, and peace of mind (IMO) is more important than performance.

Jul 5, 2006 2:58 am

The point is, The Judge, that all Jones brokers pitch the same thing to all

clients. American Funds is the answer to all.   Regardless what the situation

and what other funds you might own. Go to Jones and it is a given your

current funds will be dumped and put into American Funds.



Client needed more protection and Indyone presented another alternative.

Something Jones brokers are not allowed to do. Especially if it is non-

revenue sharing.

Jul 5, 2006 11:12 am

Truth- I knew what the point was. Perhaps I should've made mention to the liquidate and transfer form.

Why are so many people on this board "obsessed" with EDJ? There must be a reason.

Jul 5, 2006 1:02 pm

[quote=The Judge]

Truth- I knew what the point was. Perhaps I should've made mention to the liquidate and transfer form.

Why are so many people on this board "obsessed" with EDJ? There must be a reason.

[/quote] Because they are the epitome of "jerkdom."
Jul 5, 2006 4:01 pm

[quote=The Judge]

Tough to see an arbitration brewing as most American Funds are trading at/near their all-time highs.  Compare that to the annuities with their high annual fees and you can bet the ranch that almost any of their funds has absolutely trounced the VA.

Not to say that IndyOne made a poor decision; he sold the client what she wanted, and peace of mind (IMO) is more important than performance.

[/quote]

It is my understanding from having studied and passed the Registered Principal's exam that Indyone did EXACTLY what would keep him OUT of arbitration. He advised the client of what investment product SHE would be most suited for.

Thinking that performance is all that matters is what will get an advisor in arbitration quicker than anything.  It's not what the Advisor is comfortable with, it is what the CLIENT is comfortable with. And of course, documenting everything.

Jul 6, 2006 1:26 am

[quote=The Truth]The point is, The Judge, that all Jones brokers pitch the same thing to all
clients. American Funds is the answer to all.   Regardless what the situation
and what other funds you might own. Go to Jones and it is a given your
current funds will be dumped and put into American Funds.

Client needed more protection and Indyone presented another alternative.
Something Jones brokers are not allowed to do. Especially if it is non-
revenue sharing.[/quote]

Wrong!!  Next contestant please!

Jul 6, 2006 2:35 am

I think it is worth making the observation that if a Jones broker had started this thread with the confusion of annual return for standard deviation, there would have been quite a few comments about the poor understanding of Jones brokers. Just another example of how this forum is heavily biased against the firm.

If people really want to know more about Jones they should visit some offices and meet brokers.

Jul 6, 2006 4:25 am

Munytalks- You are so wrong it's beyond belief.  Please.

A client can take you to arbitration for whatever reason they choose. All they need is an attorney and a postage stamp.  It doesn't matter what the advisor or the client are comfortable with.  Still, if the performance is there (i.e. makes money and does decent vs. market conditions) you have a much less chance of being taken to arbitration.  I would bet that 95% of cases are due to lost funds/poor performance/proprietary products/churning/etc.

Now...let the attorney stew over the annual management fees/costs of the annuitie, as well as the significant CDSC, not to mention the likely alternatives available, and you can have a problem. And heaven forbid this is done in an IRA account.

I do agree with you that documenting everything is important.  Good point- but (again) a client can sue you for any reason they choose, even if it's totally not valid.

Jul 6, 2006 12:33 pm

[quote=Butkus]

I think it is worth making the observation that if a Jones broker had started this thread with the confusion of annual return for standard deviation, there would have been quite a few comments about the poor understanding of Jones brokers. Just another example of how this forum is heavily biased against the firm.

If people really want to know more about Jones they should visit some offices and meet brokers.

[/quote] For what purpose?
Jul 6, 2006 4:30 pm

[quote=The Judge]

Tough to see an arbitration brewing as most American Funds are trading at/near their all-time highs.  Compare that to the annuities with their high annual fees and you can bet the ranch that almost any of their funds has absolutely trounced the VA.

Not to say that IndyOne made a poor decision; he sold the client what she wanted, and peace of mind (IMO) is more important than performance.

[/quote]

Beg your pardon Your honor- Please re-read your own post- You say "Tough to SEE an arbitration when AF is trading at their all time highs"-

Where did I say a client can't bring a complaint to arbitration? Of course they can. You seem to imply that arbritration wouldn't go their way because of performance of funds in their 'all-time highs'.

I simply pointed out that Net Result does not mean the Financial Advisor is correct is doing what WE would do with our own account.

Imagine telling the Arbitrators-  "Hey, I know what she said about guarantees and volitility- but Look at my charts- look at my graphs- she made more money - didn't she?"

And- have you ever taken the 24? Most asked topic is best interest of the client.

Jul 6, 2006 4:35 pm

[quote=Butkus]

I think it is worth making the observation that if a Jones broker had started this thread with the confusion of annual return for standard deviation, there would have been quite a few comments about the poor understanding of Jones brokers. Just another example of how this forum is heavily biased against the firm.

If people really want to know more about Jones they should visit some offices and meet brokers.

[/quote]

Butt Kiss- I will give this one- you are right. If a Jones broker made this mistake He would have quite a tear up-

HOWEVER - in your case and Rankstocks- you would never 'man-up' and admit it like I did.  It's not fair, is it?

And anyway, if I was still at Jones, you'd likely want to hang around my table at Regional so you could learn a thing or two.