Let me also add that "The Bulldog" is getting his bite on.  He will be front and center real soon.

Fun links for troubled times....

http://www.sec.gov/complaint/selectconduct.shtml

Great article!

[quote=The Truth]

Let me also add that "The Bulldog" is getting his bite on.  He will be front and center real soon.

[/quote]

the bulldog?  PM me if you dont' want to clarify for the whole board.....I is verrrrry confused!

Me too … Who or What The F*&k is the “Bull Dog”  Please PM or Post

I ran into a Jones guy yesterday.  I said; "You know I am sorry to read about all the bad news.  He replies "What Bad News?"  Well I say; "That your firm was fined $75 million and your managers were under criminal investigation and now the St. Louis newspapers are reporting that business will change..."

This guy responds..."That all of that was just old news and it has no impact on the firm WHATSOEVER".  Talk about Wacko!

Rather than argueing with him, I just felt sorry for the poor schmuck!  For most of these Jones people intoxicated on the Jones Juice it is like they are an alcholic.....they really do not believe that any of this has an impact on their clients, their reputation and that they just can just "will" away the problems.

If you know a Jones guy try an intervention and point out the impact that they Jones Juice guzzling is having on their professional reputation.  Grab them by the lapels and shake them around, they need to come to Jesus and realize that their relationship and duty to their client is far more important than protecting the greedy HO.

Jones business plan is real simple:  "Get a bunch of friendly people, tell them to make a bunch of friends, then abuse the hell out of those relationships until the FBI comes in"

Okay...first time post, but long time reader.  So, I call a friend at the home office of Jones...just a regular guy who isn't an LP, and ask him to run some numbers....Turns out Jones is actually growing week to week since December.  It is smaller growth than normal, but growth nonetheless.  Up about 40 brokers since Dec. 1, Commissions last week were at their highest point since mid November...up about a million (He wouldn't give exacts) since last week alone.  Accounts are about even numbers wise.  sales per IR were up about $50/day  since Dec. 1.    I'm sure there will be people in this group that will parse this to mean one thing or another, but objectively...They are in fact growing despite the publicity.  Had him run it for 6 months as well and while broker growth has been stagnant (THey have grown something like 100 brokers since then), sales and assets are up considerably on a 6 month timeline as well.    Rumors of their demise are greatly exaggerated.

Just adding a modicum of fact to the board.

Turns out Jones is actually growing week to week since December

No one leaves in December, so I would expect that hiring 200 brokers per month could yield a 40 net gain.

Accounts are about even numbers wise

Almost 10,000 brokers and net new account growth is ZERO?

sales and assets are up considerably on a 6 month timeline as well.

The market as measured by the S&P 500 grew significantly in the fourth quarter of 2004, so with as many stock funds as Jones has under supervision, I would expect asset growth to be tremendous.  And like you mentioned, they had no new account growth, so that is a pretty good indicator that it wasn't growth from asset inflows.

brokerdude,,

Could you please recheck the numbers you got as there seem to be some inconsistencies (followup to Jonestown 200 new brokers per month but only 100 net in last 6 months with 40 in December alone??)

Anyway to check if the commissions were on liquidations and transfer outs or on new buys (yes StL has access to that type of info), as for up a Million over 10,000 brokers that's only an addition $100/broker  (could you update for what time period that was for). 

Any chance your friend could provide some numbers as far as how many brokers left the firm (yes they keep those numbers too)

Biggest info would be how many locations were open?

What’s the closure rate on those one man offices in strips malls that I’ve seen? Seems like it must be very, very high…

The net broker number is something that has been batter on this board in the past.  One legitimate point that was made by others but ignored was looking at IR Churn at Jones as compared to the industry. 

If Jones has 9000 IRs, they are going to loose between 180-200 IRs per month based on industry norms (using 25% annual churn and I know it is higher).  Jones is putting 200 IRs into the training program, they let 60-70% take the test.  That leaves 140 (@70%) going into the test.

They have a 90% pass rate.  We are now at 125 and 70% make it to Eval Grad.  So, they license about 90 new IRs per month.

Now, all of the above percentages are pretty good compared to the industry.

So, if Jones is adding or staying flat, they have a great retention rate (it was the low teens when I was at Jones).

What I don't get is that to grow, they need to improve the above numbers (and that would be hard to do) or start pumping more people through the system.

You guys are missing the point.  Jones was successfully running a CON game for years!  That is over.  For first time there is skeptism, embarrassment, negative press comments and criminal investigations. 

Jones strategy: "Lets tell everyone that all of this has no impact on us at all and hope they all forget about it!"

They still don't even get what they did;  "They violated the trust between their brokers and their clients for the sole purpose of lining their own pockets and then lied to SEC about it."

You can banter about the numbers, but the real test is in front of them with the CA AG and the class actions claims.  Will their capital base hold up?  No investors not even drunken RRs would be stupid enough to invest in LPs to fund the lawsuits.

If you have access to HO...ask this question  "How much is their audit firm requiring them to set aside as a contingent liability to deal with the known legal claims?"   Then see what their net capital is after that, not a earnings hit but a regulatory capital hit and that is just the start....if nothing else they may have to start worrying about their margin balances.  Right now it looks like Jones has $2.3 Billion in margin balances...at the minimum they need $230 million of unicumbered capital to support that.  

It is about the Capital Base Stupid!  

"If Jones has 9000 IRs, they are going to loose between 180-200 IRs per month based on industry norms (using 25% annual churn and I know it is higher)."

25% annual churn is industry average? I doubt that. I can see a high churn rate with trainees (the "25% after 5 years" sounds right), but 24% including seasoned RRs? Again, I have my doubts.

"  Jones is putting 200 IRs into the training program, they let 60-70% take the test. "

Huh? They have that small a percentage of trainees actually take the test? That's amazingly low. I know firms like Merrill have 90%+ pass rates for the exams and that's with something like 97% of all trainees taking them.

Sounds to me like the turn over in those one man offices is even higher that I thought.

Some numbers are wrong that are being bantered.  Jones only put about 70 brokers through training last month.  Called him and while he is uneasy talking, he says that so far in Jan, 28 brokers have left.  19 were not up to snuff.  4 were okay and 5 were apparently profitable or some such thing (I think he called them stratus 1 2 and 3  or something like that) 

The one million in sales was an increase for last week over the prior week in Net 1 week commissions for all brokers.  He will get me some customer numbers after early Feb, but they did increase their customer base by about 100,000 clients in December. 

As for all of the audit/reserves questions...I don't know...I think you overstate the value of those claims...Jones will not end up paying CA 300 million.  Think more in terms of 3-5 million for that one even if they lost it big.  (I don't know but do they have that many brokers in CA to start with?)

Personally, I went indi too long ago to care too much (1997) but I hate to see this board get too hyped up about Jones dying.  I still have some fond friends from there and quite frankly felt like they trained me well.  My decision to leave wasn't so much based on a hatred of the place as it was just about money.

You are right about one thing Brokerdude, it is about money. The SEC and the NYSE require firms to have enough money to support their margin balances and customer reserve requirements. When they do not have enough money they are shut down and SIPC takes over.



Do any of you youngsters remember Drexel? They were very profitable…didn’t matter though. The law suits from the junk bond sales practices put them under! If you think you can guess the outcome of a lawsuit then you are in the wrong business.



Look I don’t hate or dislike Jones. I am just reminding everyone that reads this board that Financial Institutions that are required to keep their capital unincumbered can go very quickly. Remember General American, Drexel, Miller Johnson,? All of those firms remained “profitable” but the plaintif lawyers and regulators took away all of their capital and the regulators shut it down.



Also when you got all of these legal claims hanging around you can not raise capital. If Jones were a public company the short interest would be at record levels. The industry analyst know that a brokerage firm needs capital and broker/clietn confidence when either one of those is gone it is over!



Go aheed Homies ask the big shots that prepare the FOCUS reports see what they think about the capital issues, but the better questions are posed to the outside auditors who have to sign off on the net capital computations.



Its The Capital Stupid!

[quote=Lance Legstrong]
Also when you got all of these legal claims hanging around you can not raise capital. If Jones were a public company the short interest would be at record levels. The industry analyst know that a brokerage firm needs capital and broker/clietn confidence when either one of those is gone it is over! 
[/quote]

"When the strong box contains no more, both friends and flatterers shun the door."

- Plutarch 

Lance-illuminati- Edward Jones is going to fail, but it will not be for lack of capital (remember those limited partnerships), nor will they fail from the recent SEC fine. Edward Jones is doomed to fail because of its business model. When I first joined EDJ I must say I was naive. I thought the one broker office was great. Then I realized the headaches involved with dealing with a BOA, buying all the supplies out of my pocket, dealing with the other tenants and the landlord through EDJ, back office,wanting to get things done, but then dealing with the bureaucracy. Talk about frustrating. So much for my experience. The one person office is why Edward Jones will fail. Why you ask? Because, you cannot put 8000+ people in the field with little or no experience, and not be prepared for them to screw up from time to time. This is a compliance nightmare. IF THIS WAS SUCH A GOOD MODEL WOULDN'T SMITH BARNEY, OR MERRILL BE ORGANIZED IN THE SAME WAY?

Former, that is the worst argument I have read for Jones to fail. Jones will fail because IRs have to buy their own toilet paper? Those were the rantings on this board before the revenue sharing added at least a legitimate argument here. Just how low was your production? (sorry, that comment was uncalled for)

Brokerdude!!!!

Come on now I KNOW your facts are not right.  The breakdown of brokers is completely incorrect.  Jones lost one of their TOP producers in January over a $1,000,000 producer in addition to several profitable offices some over $100 million in assets.  In fact rumor has it that over Martin Luther weekend they may have lost as many as 30 offices alone.  I am telling everyone on this board DO NOT take to heart anything brokerdude post because I promise you his numbers are incorrect.  I apologize you are getting bad information, but tell your friend to check himself.  Apparently the brainwashing is happening at all levels of the firm.