Hey, if you can manage the risk, more power to you.  I prefer to hand that task off to people who actually do it for a living.  New World would have been a better comparison, still imperfect, but better and it blows your index away over the last 5 years.  As far as tax effeceincy (sp?) you got me there.  Here is my problem with most ETF portfolios.  They suck.  The allocations are based on historical models and ignore current conditions.  Most models I have seen put the Intl allocation at 15-35% at the most even though Intl outperforms domestic 8/10 years.  Intl has outperformed substantially over the last 5 years and yet these models may increase the allocation a couple of points.  Doing it properly, heavy Intl 2003-2007 would create quite a bit of movement in the portfolio eliminating the cost (commission accts) and tax arguments that you have given.

Wow.  Not a Jones sales blurb, just a criticism (sp?) of the comparison.  If you believe that Cap World vs his index is a valid comparison, then you are the incompetant one.  The asset allocation is considerably different.  If he was saying that the Jones broker calls CWGIX their Intl allocation to fit a model, then newnew would be right.  However I have a brain and am concious, so I noticed immediately that the comparison was not “imperfect” it was WRONG.  BTW, I take most of my business from Jones brokers.

icecold is probably referring to your decision to max out intl positions just because they have had so many great years. The portfolios don’t “suck”—they are about the Efficient Frontier etc etc and managing risk moving FORWARD. It was interesting that you complain about using historical models and then only talk about the historical returns of intl. Your argument sopported LESS not MORE

one last thing: unbelievable that you would quote returns AFTER THE FACT to justify the tax inefficiency of these MFs. you said :"Doing it properly, heavy Intl 2003-2007 would create quite a bit of movement in the portfolio eliminating the cost (commission accts) and tax arguments that you have given. "

Who said anything about knowing in advance,  Intl (EAFE) went positve relative strength to S&P in July 2002.  If you agree investors chase returns, albeit way too late, you would have starting moving domestic equity positions (regardless of your blend) to intl investments.  Guess I’m lucky.  Funny how you have not refuted my point, it was a terrible comparison.  As for the tax issue, I am a very active asset allocator, so in my business, ETFs do not have a big advantage.  I will concede the point that they do have an advantage.  As for “quite a bit of movement” comment I made,  I was very heavy in bonds from 11/00 to 5/03 and made a large move back into equities in general in 2003.  I am not tax efficient in my practice nor do I try to be.  And before you criticize, my clients did not mind the tax bill I generated for them in 2003 as most made money or held steady during the bear market.  Everything is a trade off.

IMHO, you can’t try to compare actively managed funds (especially an AMF) directly to an index. I think the better thing to do, which is what I typically do, is build portfolios, then look at the overall makeup of the portfolio. Trying to piece together active funds that compete directly with an index doesn’t really work. You really have to compare a portfolio of index/ETF funds to a managed portfolio that has a similar breakdown. And I am not saying one is better than the other (though I do like active management), I am just saying that comparing each fund versus each ETF is sort of a non-starter.



At the end of the day it comes down to risk, return, and diversification. There are lots of ways to get there. Rather than trying to pee all over each other, giving ideas on this forum is far more constructive. As an example, I would love for someone to show me a great portfolio of ETF’s. Jones has a Focus List, but they give no direction on portfolio construction. Until rather recently, I have sort of ignored ETF’s. But as I have acquired more large qualied accounts, I have found it helpful to consider ETF’s. I just don’t have the confidence to use them much yet - partly because I like to see long historical returns and STDDEV’s. I am hoping with Jones’ managed model this summer, there will be plenty of resources for this. I know they will be based on models, so I am sure they are providing this. But any suggestions on how to construct the models would be helpful.



Thanks.

i have not refuted your point because it is true.  these comparisons are never exact. much more important though is that you cannot justify tax inefficiency but saying that a certain asset class made up for it (intl in this case). You are right–you were lucky.

[quote=newnew]i have not refuted your point because it is true. Thank you. these comparisons are never exact. much more important though is that you cannot justify tax inefficiency but saying that a certain asset class made up for it (intl in this case). You are right–you were lucky. If it’s luck, I have been lucky quite a bit.

we agree to disagree which is fine. best of luck.

Spiff and B24,

I appreciate your comments. As for my time at Jones - they could not handle real estate. I have quite a few farm clients sitting on 5-10k in land and they could never get behind a proposal. When granddad dies and the life insurance goes liquid to one kid for $3mil and the other kid gets the $3mil farm you have to be ready. They could never be ready. Even on rental properties. Maybe something has changed in the last 18 months but to do any kind of business planning or real advise was a nightmare.

Having meet Doug several times and having personally spend time with him one on one it was great. I really did like the guy. I understand how comp works out with big firms. BUT what they represent and what they do are two different things. If you are going to tell your IR’s oops FA’s that they are business owners and to treat it like its your business they when you skim off the top to cover a lawsuit you better let us know.

As Indy, I know what I get. At Jones… wells you just dont. I feel bad for the buddies I still have there. Indy is a different world but it is a dramatically better world with a lot more to offer your clients. And at the end of the day, its my clients that are putting my kids through college not a GP.

Freeman, you’re right.



I think the mistake that people make time after time on this board is trying to compare Jones to an Independant B/D platform. It’s not the same thing. It’s not even close. Now, you can compare Jones to AGE/Wach, ML, SB, any of the others, and at least reasonably compare payouts, support, technology, etc.

But to try and compare to LPL or RayJay or whoever is like comparing a Honda Accord to a Harley Davidson (I wanted to use the apples to oranges thing, but that’s way overused).



The fact is, if you compare our total payout to the total payout at a wire, we are very comparable - probably right in the middle of the pack. Depending on your production level, we may be higher or lower. We are higher for newbies, lower for mid-level producers, and often higher for big producers (though the big wildcard is the profitability bonus, which is dependant on several factors; our profit sharing is also uncapped for big producers). I don’t include LP in the mix because it’s really just a very high yield bond that you pay 25% for.



Unfortunately, we just have to accept that we are employees, and although we work in a unique single-advisor, no BOM office, we are not “owners” - we are “operators”. We are much more similar to a BOM than to a independant advisor with LPL. BUT, the point that Jones hammers home to us is that we should RUN the business like it is ours, since we are 100% responsible for our production and profitability (just like at the wires). It really is the way we should run the business.



Let’s all agree to get over this…

Freeman, you’re right.

I think the mistake that people make time after time on this board is trying to compare Jones to an Independant B/D platform. It’s not the same thing. It’s not even close. Now, you can compare Jones to AGE/Wach, ML, SB, any of the others, and at least reasonably compare payouts, support, technology, etc.
But to try and compare to LPL or RayJay or whoever is like comparing a Honda Accord to a Harley Davidson (I wanted to use the apples to oranges thing, but that’s way overused).

The fact is, if you compare our total payout to the total payout at a wire, we are very comparable - probably right in the middle of the pack. Depending on your production level, we may be higher or lower. We are higher for newbies, lower for mid-level producers, and often higher for big producers (though the big wildcard is the profitability bonus, which is dependant on several factors; our profit sharing is also uncapped for big producers). I don’t include LP in the mix because it’s really just a very high yield bond that you pay 25% for.

Unfortunately, we just have to accept that we are employees, and although we work in a unique single-advisor, no BOM office, we are not “owners” - we are “operators”. We are much more similar to a BOM than to a independant advisor with LPL. BUT, the point that Jones hammers home to us is that we should RUN the business like it is ours, since we are 100% responsible for our production and profitability (just like at the wires). It really is the way we should run the business.

Let’s all agree to get over this…

True.  But I can’t believe that someone with enough intelligence to be in this business (okay, that’s questionable at times) doesn’t see through the fact that you don’t OWN the business, you just RUN the business.  I guess I never found myself “duped” the way many on this board seem to suggest.  Nor do I think Jones misleads people into thinking they own the business.  Maybe I just never looked at it that closely, or maybe I just knew the business well enough to understand what it was. 

I agree with Broker24. I would be hard pressed to believe I was actually an owner of my EDJ business without talk of franchise, equity share, etc. Especially since no compete clauses are signed.



The allure of RUNning my own office however is very much alive. Maybe I watch “The Office” too much but can’t stand the thought of a cubicle or open floor office.

I have always thought it was interesting that there is such a comparison made between Jones and indy.  But there is very little comparison made between Merrill or Morgan and indy.  Perhaps that’s because this board seems to be frequented mostly by people who either work for Jones or used to work for Jones and that is the only comparison they can make.  The comparison really is like Harleys and Hondas (good one B24). 

[quote=Spaceman Spiff]…I have always thought it was interesting that there is such a comparison made between Jones and indy.  But there is very little comparison made between Merrill or Morgan and indy.  Perhaps that’s because this board seems to be frequented mostly by people who either work for Jones or used to work for Jones and that is the only comparison they can make.  The comparison really is like Harleys and Hondas (good one B24). 

When I went to Jones I was under the impression that I would be “running my own office”  not that I would own the office.  I knew it wasn’t a franchise in the strict sense of the word. 

And if you ran a MCD franchise you couldn’t sell Whoppers. 

Go to a professional networking site like Linked-In and see how many Jones brokers call themselves “Owner”. I saw a Jones buddy of mine not only lists himself as the Owner of Edward Jones, he also claims he is a RIA. (Think he got the S66 IAR idea confused with what he’s reading in the media!) He’s a great guy and I would trust him with my money, but how do you tell him “you’re an employee and you are definitely not an RIA.” 

Just like that.  If he’s disseminating info that says he’s an RIA, then he’s going to get himself in trouble.  If he’s a buddy, make a point to tell him he’s about to get in trouble.