NO recommendations in IRAs?

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Feb 8, 2009 10:35 am

How do you Jonesies feel about the new ruling that we can no longer provide advice/recommendations in IRAs?

Compliance says that from now on we must provide at least two options, educate the clients fully about each and then insist that they choose the investments they want in their portfolios. We can no longer tell them which stock, bond, mutual fund, annuity, etc., we believe is best for them--they must choose. Several vets in my region have already said they're considering resigning.   Jones says it's an industry-wide issue based on a 1974 ERISA fiduciary ruling, but I've heard the "it's an industry-wide thing" many times before from Jones that later turned out to be untrue.    This is going to get interesting...
Feb 8, 2009 10:42 am

People are mad because you have to give the clients a choice? Do you have any idea how much easier it is to close a sale if the client is the one who chooses? 

Feb 8, 2009 11:15 am

I haven’t heard anything about this. (I’m assuming you mean client 401ks when you say IRAs).
Anyway, isn’t this a non-issue in a real world situation? You describe the funds, extol the virtues of target funds, tell them what’s best for them … and then leave it there. Usually by the time in the relationship where they are showing you the 401k they will do whatever you want, or maybe they just do want some Morningstar reports to make up their own mind.
This sort of reminds me of the compliance officer who asked if I was telling my prospects that I could win a diversification trip if they opened a $50 a month Roth IRA with me.

Feb 8, 2009 12:12 pm

I think it’s regarding 401K’s. And this has always been the case since ERISA. I think they are just reiterating it. Just do what you normally do. Hopefully you already knew that you have to tread a little lightly with 401K advice.

Borker, I think the “several vets are considering resigning” line is a bunch of horseshit.

Feb 8, 2009 12:42 pm

This is the problem with this forum. You post that you can’t make IRA recomendations and that people may resign. Did you do your homework before posting? I am a former Jones guy and remember being told this info about clients 401ks because you don’t want to become a fiduciary by giving advice on an acct you do not hold. Where did you hear guys are going to quit over this? People, this site is supposed to get info out. If you put info in here, don’t just make stuff up so can read your own post over and over. Get a clue and think before you post, don’t just sell American Funds.   

Feb 8, 2009 1:15 pm

I guess I could use the “quote” feature and reply individually to each of you, but I’ll save time and space by saying this:

  1. I did not mean 401(k)s, I meant IRAs. 2. Several vets in my region have already said they're considering resigning over the recent ruling by Jones's legal department. 3. I realize there has always been a fiduciary issue with 401(k)s. 4. Again, I said IRAs, and I meant IRAs.   If you're at Jones, you'll realize very soon that I'm not making this up. The information from my first post regarding the recent ruling is nearly verbatim from a Jones Field Supervision Director.
Feb 8, 2009 1:58 pm

Borker, do us a favor. You let us when one of your vets resigns because of this.

Feb 8, 2009 2:10 pm

There is a proposal tool at UBS that automatically generates 3 alternative proposals and includes them in an appendix.  But only when the proposal is for IRA accounts.  I always assumed it was a ploy to dilute FA loyalty but maybe there is some creepy ERISA thing lurking.

Feb 8, 2009 5:36 pm

For example, if we're going to suggest mutual funds, we have to give the client at least two families to choose from. If we choose Hartford and American, we have to educate the client about both fund families and have them pick one. If they say they don't know which family to choose, we have to tell them it's up to them to make the decision.

Once they've chosen their fund family, we have to put together at least two different portfolios that we deem suitable for them, and again they must choose. If they ask us which option we'd recommend--because "that's what they pay us for"--we must tell them we cannot make a recommendation and that they must choose the portfolio they want.   The same thing goes for bonds, stocks, annuities, etc. We must provide at least two choices of each investment and let the client pick.   The new policy goes far beyond just asking whether a person wants a 15 year Equity Indexed Annuity or a 20 year Equity Indexed Annuity, but as always, Hank, your comments are greatly appreciated.
Feb 8, 2009 6:00 pm

Let them choose between any two AF’s, they are all basically the same.  On a more serious note, IF what you are saying Borker is true, that is very stupid and I understand your frustration.

Feb 8, 2009 8:20 pm


Imagine going to the Dr. and they say – "I need you to pick what kind of medicine you should take!"

thats sad if the compliance dept says that.

Feb 8, 2009 9:38 pm

I’m not frustrated…actually more amused than anything.

  Jones says it's an industry-wide issue, implying that other firms will soon be implementing this policy.   Time will tell.
Feb 8, 2009 9:50 pm

Whenever Jones told me “it is industry wide” i knew they were full of crap… If it was they would cite a reference…

  If this is true for Jones, they are going to be the laughing stock of everybody... including Primerica.. which is sad... glad I am gone...   On a side note my old region has had 4 people leave in the last month with 3 more planning on leaving within the next month(that I know of)...  
Feb 8, 2009 10:47 pm

Here is two choices for you.

  1:  Borker is the biggest idiot on this forum.   2:  People that buy into his crap and respond as if it is true are the biggest idiots on this forum.   Now there's a couple of choices any client would have problems figuring out without our help.
Feb 9, 2009 9:05 am

Borker, Tell us where on the system it tells us we have to do this.

Feb 9, 2009 9:22 am

The ruling should have printed in your office on Wednesday, 1/28.

  You probably glanced at it like I did--although many in my region said they never saw it--and thought it was just a reminder of fiduciary issues associated with giving adivce in 401(k)s. I gave it no attention until my FSD explained Jones's position on it in detail.   If you'll search for ERISA and IRA, you can read the frequently asked questions about it.
Feb 9, 2009 9:40 am

Here it is....Oh yeah, I'm resigning.  I'm done.

Explain Your Role, and Theirs: Explain to clients that your role is to help them determine how their available funds should be invested and to identify the types of investments or portfolios that match their investment needs. It is their role to make the decisions, with the assistance of the information you provide. Give The Client Choices: Provide each client with at least two appropriate choices of investment options that match his or her portfolio objective or the objective identified for the individual transaction. Empower Clients: Educate clients on how to think about and make their retirement choices. Utilize available tools to demonstrate proper asset allocation, determine risk tolerance and provide information clients need to decide which investment(s) best fit their personal situation. Ensure that the ultimate investment decisions are made by the clients, not you. Complete the Required Forms: Ensure that each retirement plan or IRA owner has opened an Edward Jones account for each plan and executed all required Edward Jones account documents. Do not agree in writing or otherwise to be a fiduciary for any client account.

Borker, I'm not sure if you're making some big deal about this just to be anti-Jones, or if you are seriously concerned over it.  I bet if you look at the Compliance manual for every other brokerage firm, there is language similar to this.  And FYI, this does not apply to advisory accounts (SMA's and MF advisory).

Feb 9, 2009 9:48 am

I’m not really concerned with who believes it’s a big deal and who doesn’t, and I’m not being anti-Jones. I’m just relating the things I heard during the initial explanation of Jones’s new position on the issue by Compliance.

  I read the FAQs and thought it was really no big deal, until I heard Compliance go into detail about how it's going to change the way we work with clients.   I couldn't care less what you do. My primary question is whether other firms will require adherence to this policy the way we at Jones are about to be required to.   And you're correct, if you can stick to the advisory account and MAP, you'll be completely unaffected by this.
Feb 9, 2009 10:29 am

I think you’re making a mountain out of a mole hill.  And there’s not a vet that wasn’t already planning on leaving that would leave over this. 

  If this were really a big deal, we would have received wires, emails, calls from our compliance liasons, received info at our regional events, etc until we all understood it.  Kind of like when Advisory Solutions came out.  Do you remember all the hype around that launch?  This was a one page letter from compliance putting the info out there, my guess here, simply to satisfy the regulators.  How many fspends have you received when you opened up a new IRA account and invested money in CAIBX?  Did your FSD ask if you had presented ABALX or AMECX too?  No.  Did  you have to have the client sign off on something that said you showed them two annuity policies before they signed on the dotted line?  No.    You're making way too much out of this.  Just get back to talking with clients and educating them on investing.  In a normal conversation like that, you'll more than likely satisfy the requirements.  
Feb 9, 2009 10:50 am
  I give up. Call your FSD and ask whether this issue is one that can be satified by having "normal conversations" with our clients, i.e., the status quo.   You'll see.