Myths: Fee- Based...EJones...

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DCedjones's picture
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Joined: 2007-01-02

I wanted to quickly dispell a few myths being broadcast by "fee-based" "financial planners" with "CFPs" who "aren't salesmen" [to you CFPs out there...even though I am training for mine, we all know the game...mostly older established guys who are trying to box-out competition from younger guys...they know we cant compete on performance...and they know we all have access to essentially the same good products and info if we choose to use it...so why not compete based on something the newbies cant afford?...the time and cost required to get a CFP and all the additional hoopla...tell me, how much did a CFP impact ave. annual returns for your clients from 1997-2002?]
I have seen enough on this forum and generally on the internet of the digital pollution they spread that attacks the business of many respectable and honest "brokers" with 10 times more ethics than the rest...and as I work for Edward Jones I would like to also dispell similar nonsense that is being purported most likely by the same folks...
As the bible says: "let those who have wisdom understand..."
1) Fee-Based business is still business...any business has inherent conflict of interest with its clients as it depends on the client for survival...any situation of dependency becomes dangerous to the host (we know this even from science)...specifically with fee-based, the danger is COST-CUTTING...many (not all) fee-based folks are boosting their margins by putting clients in the lowest-cost(to the advisor) funds such as Vanguard and Fidelity ETFs, and are refusing to do any further management...why?...because additional transactions mean additional cost for the "fee-based" advisor...and that means less profit...with the dawn of the internet and online discount brokers it is ludicrous to me that I would pay 1-2% of my assets to a "fee-based" advisor who does nothing more than put me in a Vanguard ETF for the rest of my life...who is afraid to trade to protect my downside risk in a bear market because that cuts into his profit!!...I could have easily done that myself...at least a "broker" who is paid on transactional basis has an incentive to make every "transaction" the best possible as that is what guarantees that any future transaction will take place with that client...and knowing all this it drives me bonkers to see the devoutness with which these "fee-based" guys go out into the public forums to damage the image of anyone who is not also doing fees...
2) Edward Jones is moving towards an ideal model of some additional fee-based (we already have some managed account business) as well as preserving the traditional transactional approach...why is this ideal?...it gives consumers choices (the cornerstone of a free market), and it helps "brokers" "advisors" "fee-based planners" (i hate all the jargon b/c we truly are all in the same boat at the end of the day) to balance conflicts of interest with client from both sides...dont have to be too pushy transactionally...but dont have to be an idle asset-gatherer with limited value added either (i.e. just dumping clients in an index fund)...might as well work at the bank if you want to do the latter...
Jones door-knocking model is difficult, but ask yourself this...who would you be more responsive to with your life savings?...a guy on the phone who you have never met?...or a guy (or gal) who has made an effort to come to your door on numerous occassions, introduce themself in person (the classy old-fashioned way) and physically deliver you proofs in writing of all the ideas that have been pitched?...as well as being located in a visible office around the corner from you to add to credibility...i think these aspects of the door-knocking logic are untouchable (still not to say that the work is  not hard and the sales cycle sometimes slower this way...slower but sweeter)
And a final word to the independents...going independent is great...if you want to keep up with the constantly changing rules and regulations (that get stricter) every year in our industry...and you feel confident that you can monitor yourself against pursuit of your own best interest...at Jones we have a compliance department (best in the industry) that does all this work for you...why is that great?...lets try a little analogy...if you were the police looking for folks in the community who are likely to have violated the law, where would you crack down first?...the house on the street located right next to a police station and a retirement community?...or the house further down the street with no visible address markings, thats hidden under the shade of some trees, and that no one else on the street really knows the owner...independents look out...watcha gonna do when they come for you?...
yes its a big hoopla when Jones or a big brand name firm does finally get busted for just above a minor infraction (at least in comparison to some of the other stuff that goes on out there), but that is b/c it has the shock value of watching a nun get carted out of the convent for sneaking in a boyfriend for the night to celebrate new years...you'll never see a registered rep article for each and every indy firm that was busted for "serial axe-murder" of clients...
 

spikedkoolaid's picture
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Joined: 2006-04-20

DC-
You really have swallowed the kool-aid!  Everything you said was exactly what I used to believe when I was at Jones.  They are a good firm.  What's annoying is people like you that make arguments saying (the best compliance, knocking on doors is the best way to get clients, our fee-based model is going to be the best).  Jones is not the best and 5 years ago I asked John Bachman about fee-based business and he replied,  "if you want to build a fee-based business, you shouldn't be at Edward Jones." 
You have truly bought into the company mantra and if that empowers you to improve your business in 07 more power to you.  All I can tell you is January 9th, 2006 I went to LPL and I have never been happier.  I produced more gross revenue.  I kept more of my money.  I contributed more to my 401k.  I made a bigger profit sharing contribution.  I got to write off the insurance premiums I paid.  I also have had no problem with keeping up with compliance.  I think that EDJ has you fooled.   By the way, they said I would only take 50-55% of my business.  As of yesterday, I took 87.5% of my business. 

$$$$$'s picture
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Joined: 2006-11-10

Spike,
What aum did you take with you? also how's your gross a year later? I'm considering LPL as well. I'm also an ex joneser.
Thanks.
 

Broker24's picture
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Joined: 2006-10-12

My god, DC, just get off this forum.  I can't believe I have to respond to both posts.  Again, you are an embarassment to our firm, and should probably refrain from posting regarding anything.  You do not represent what the majority of the firm believes, and people like YOU are the reason Jones gets bashed so much on this forum.  When you have something practical to say, come back.
I feel like I just put my 5 year old in a "timeout"....

BrokerRecruit's picture
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Joined: 2005-04-19

You're not going to convince anybody and only going to get people pissed of at you. 
If door-knocking is so great, why don't you do that instead of wasting people's time?

The Truth's picture
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Joined: 2004-12-01

Best compliance department in the industry? I am sure you learned this bit
of information from your employer?   You have to be kidding.

Captain's picture
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Joined: 2006-04-07

I love the 'best compliance in the industry' who lets their advisors conduct
liquidate and transfer orders just so the advisor gets another commission.

The best one I've seen as of late is the advisor who fully liquidates an IRA
account which includes a few American Funds, only to try to REPURCHASE
the shares back, with a commission, at EJ.

I laughed hard when I wrote the letter to the client, who promptly
recinded the transfer from Jones..... with a smile.

Jones may be a good firm, however, turning a blind eye is the trademark
of a sh*tty compliance department in my book.

That's just the beginning.......

C

spikedkoolaid's picture
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Joined: 2006-04-20

$$$$$,
I was at Jones for 8 years.  I was new/new.  I left with $50,000,000.  I was at $535,000 Gross.
I just did $412,000 Gross in 9 months.
I hope that helps.  Private Message me if you have any other questions.

rankstocks's picture
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Joined: 2005-02-10

Spiked,
    If you couldn't max out your 401k at Jones, I don't really know if you are qualified to give "experienced" advice.  87.5% of 10 million still isn't much.
 

spikedkoolaid's picture
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Joined: 2006-04-20

Rankstocks,
I don't know where you get your info from.  I was able to fully fund my 401k, after my 3rd year at Jones.  Yeah, I didn't make enough, in the beginning, to keep my family afloat, but after I started making real money I was able to max out my 401k.  I finally got out of debt the last year I was there.  This year I made $424,000 gross.  After expenses including taxes I will take home, somewhere close to $308,000.  Pretty nice jump from the w-2 days, when I made $565,000 gross and I got to keep $100,000 after taxes and expenses.
I'm so happy I decided to leave.

BrokerRecruit's picture
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Joined: 2005-04-19

Whether you maxed out your 401k or not, DCedjones is still an idiot.

rankstocks's picture
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Joined: 2005-02-10

Spiked,
   You wrote, "You have truly bought into the company mantra and if that empowers you to improve your business in 07 more power to you.  All I can tell you is January 9th, 2006 I went to LPL and I have never been happier.  I produced more gross revenue.  I kept more of my money.  I contributed more to my 401k.  I made a bigger profit sharing contribution.  I got to write off the insurance premiums I paid.  I also have had no problem with keeping up with compliance.  I think that EDJ has you fooled.   By the way, they said I would only take 50-55% of my business.  As of yesterday, I took 87.5% of my business."
  You are a liar.  By saying you were able to contribute MORE to your 401k proves you do not max it out.  That is why I don't believe anything you write.

troll's picture
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Joined: 2004-11-29

rankstocks wrote:Spiked,
   You wrote, "You have truly bought into the company mantra and if that empowers you to improve your business in 07 more power to you.  All I can tell you is January 9th, 2006 I went to LPL and I have never been happier.  I produced more gross revenue.  I kept more of my money.  I contributed more to my 401k.  I made a bigger profit sharing contribution.  I got to write off the insurance premiums I paid.  I also have had no problem with keeping up with compliance.  I think that EDJ has you fooled.   By the way, they said I would only take 50-55% of my business.  As of yesterday, I took 87.5% of my business."
  You are a liar.  By saying you were able to contribute MORE to your 401k proves you do not max it out.  That is why I don't believe anything you write.Not necessarily.  It means that in addition to maxing out his salary deferral contribution, he also maxed out the company contribution AS A BUSINESS OWNER...put in more than Eddie Jones GP's were able to spare for him when he was there.

uwec86's picture
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Joined: 2004-11-30

Rankstocks,
I left Jones 4 years ago and couldn't be happier...aren't you the guy who was the HUGE EJ advocate a couple of years ago?  What made you leave EJ a year ago?

spikedkoolaid's picture
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Joined: 2006-04-20

Oh Contrar Mr. Rank,
What I guess I left out was, 401k/profit sharing.  I am now able to put $15,000 into my 401k and another $27,000 into my PS.  I am also able to pay my wife $15,000 and put the entire amount in her 401k.  I am also able to make a profit sharing contribution for her of $2250. 
So the scoreboard reads:
Edward Jones Savings
$15,000 401k and $6000-$8000 PS contribution total= $21,000-$23,000 deferred.
LPL (Independent Savings)
$15,000 401k me, $15,000 my wife plus $29250 Profit Sharing Contribution.
Total=$59,250.
The difference is $36,250 more into "my 401" now than at EDJ.  I don't know if that constitutes lieing in your eyes but in most people's eyes it's pretty simple math. 

Spaceman Spiff's picture
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Joined: 2006-08-08

spikedkoolaid wrote:
Rankstocks,
I don't know where you get your info from.  I was able to fully fund my 401k, after my 3rd year at Jones.  Yeah, I didn't make enough, in the beginning, to keep my family afloat, but after I started making real money I was able to max out my 401k.  I finally got out of debt the last year I was there.  This year I made $424,000 gross.  After expenses including taxes I will take home, somewhere close to $308,000.  Pretty nice jump from the w-2 days, when I made $565,000 gross and I got to keep $100,000 after taxes and expenses.
I'm so happy I decided to leave.

Your Jones numbers don't make sense to me.  You only got to keep $100K after taxes and expenses?  Spiked, at $535K gross at Jones your net is $225K.  Even after taxes and expenses you should have hit $150K net/net.  I'm not even throwing in your profitability bonus of what was probably around $50K before taxes.  I know my numbers might be off a little, but I find it hard to believe you weren't taking home close to $150K even after you funded your 401K. 
I'm also trying to figure out how you are able to keep 72% of your gross AFTER taxes and expenses.  I know you indies get a bigger payout, but that's insane.  

spikedkoolaid's picture
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Joined: 2006-04-20

Spaceman-
Here's how it breaks down.
I had about $120,000 gross in MAP that only paid out 35% at the time.  I was instrumental in having the GP's change the payout to 40% right before I left.  It took 3 years of writing wires (emails) and being a squeeky wheel.
Jones tells you it's a 40% payout but it actually works out to about 38% after national advertising, and some products that don't pay 40%.  So you take 38% of $415,000 that equals about $157,700 and then you add my MAP and   $42,000.  My total was 199,000 net.
So then you break it down from their.  $16,666/month
$1500/month 401k deferral
$1000 medical benefits premium for family of four
$450 flex spending deferral (medical)
$450 flex spending deferral (childcare)
$200 disability insurance premium
$2500 flex spending business expenses (seminars, advertising, bonus to my assistant because Jones' didn't pay a living wage in CA)
$6000 State (CA)/ Federal taxes
$100   Error/ Branch Loss
Total $12200
So Net/Net/Net  is approx. $4466.
I hope that helps you realize where the money goes.

Indyone's picture
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Joined: 2005-05-31

rankstocks wrote:Spiked,
   You wrote, "You have truly bought into the company mantra and if that empowers you to improve your business in 07 more power to you.  All I can tell you is January 9th, 2006 I went to LPL and I have never been happier.  I produced more gross revenue.  I kept more of my money.  I contributed more to my 401k.  I made a bigger profit sharing contribution.  I got to write off the insurance premiums I paid.  I also have had no problem with keeping up with compliance.  I think that EDJ has you fooled.   By the way, they said I would only take 50-55% of my business.  As of yesterday, I took 87.5% of my business."
  You are a liar.  By saying you were able to contribute MORE to your 401k proves you do not max it out.  That is why I don't believe anything you write.
...and you are an idiot.  I knew immediately how Spiked was contributing more as a business owner, but you, rather than doing some homework and/or asking a question about how it's done, call Spiked a liar.  I just poked a little more than $20,000 into my own solo(K) for 2006...could have done more, but held my W-2 down a bit to reduce social security taxes...a nice tax-planning device that sadly appears to be in the congressional crosshairs.
I'm not asking you to agree with him...it's obvious that you swallow everything your superiors tell you as the gospel truth, making it impossible to agree with or believe anything stated by someone who's left the fold, but really...you look about as stupid as DCedjones.
No go stick your head back in the sand...it appears that you're happier there...

spikedkoolaid's picture
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Joined: 2006-04-20

Thanks Indyone for educating the clones!  I struggle with the w-2 number as well.  I'm not sure where the sweet spot is for me to take as a draw.  Any ideas forum crowd.  Should I pay myself $10,000/month or $12,000/month.  I've had so many different opinions, I never know the actual breakdown of what's best for me. 
 

troll's picture
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Joined: 2004-11-29

spikedkoolaid wrote:Thanks Indyone for educating the clones!  I struggle with the w-2 number as well.  I'm not sure where the sweet spot is for me to take as a draw.  Any ideas forum crowd.  Should I pay myself $10,000/month or $12,000/month.  I've had so many different opinions, I never know the actual breakdown of what's best for me. 
 I suggest eleventy kabillion....

Indyone's picture
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Joined: 2005-05-31

10-12K is much less relevant than 3-12K.  At 3K, you really cut down on FICA.  At 10K or 12K, either way, you're going to max out FICA....just not medicare...and that savings is much smaller.  The problem with taking your salary down to say $36,000/year is that it may be judged unreasonably low in comparison to your company's net earnings and congress is looking at all sorts of ways to play Robin Hood and shore up the social security system...

spikedkoolaid's picture
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Joined: 2006-04-20

Agreed-
I guess I was just wondering about paying myself $200,000/yr or should I keep it low around $120,000.  My goal is to max out my 401k/profit sharing and pay the least amount of taxes.  I have set up an S-Corp.

exdrone's picture
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Joined: 2005-07-01

spikedkoolaid wrote:
Oh Contrar Mr. Rank,
What I guess I left out was, 401k/profit sharing.  I am now able to put $15,000 into my 401k and another $27,000 into my PS.  I am also able to pay my wife $15,000 and put the entire amount in her 401k.  I am also able to make a profit sharing contribution for her of $2250. 
So the scoreboard reads:
Edward Jones Savings
$15,000 401k and $6000-$8000 PS contribution total= $21,000-$23,000 deferred.
LPL (Independent Savings)
$15,000 401k me, $15,000 my wife plus $29250 Profit Sharing Contribution.
Total=$59,250.
The difference is $36,250 more into "my 401" now than at EDJ.  I don't know if that constitutes lieing in your eyes but in most people's eyes it's pretty simple math. 

So Rankstocks,
Did learning something new offset the pain of having your a$$ handed to you?
How did you no know about this? Dont you guys still have Lord Abbett wholesalers that run around like mad pitching their "super cheap" owner only and safe harbor 401(k)'s?

DodgerDraftpick's picture
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Joined: 2006-12-24

I just have to say I think it's hilarious how Ranky rank shut his mouth after being slammed every which way but loose.  He obviously has no clue how to relate to a business owner, and I doubt he will be in the business in a year with his intelligence level

rankstocks's picture
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Joined: 2005-02-10

Spiked, sorry, your numbers don'e add up:
you wrote,
I had about $120,000 gross in MAP that only paid out 35% at the time.  I was instrumental in having the GP's change the payout to 40% right before I left.  It took 3 years of writing wires (emails) and being a squeeky wheel.
Jones tells you it's a 40% payout but it actually works out to about 38% after national advertising, and some products that don't pay 40%.  So you take 38% of $415,000 that equals about $157,700 and then you add my MAP and   $42,000.  My total was 199,000 net.
So then you break it down from their.  $16,666/month
$1500/month 401k deferral
   I didn't realize you could put 18k away a year, especially since the max was 14k/year when you left Jones.
$1000 medical benefits premium for family of four
   Seems very high, I pay $259/month for my wife and I.
$450 flex spending deferral (medical)
$450 flex spending deferral (childcare)
$200 disability insurance premium
$2500 flex spending business expenses (seminars, advertising, bonus to my assistant because Jones' didn't pay a living wage in CA)
   I call B.S. on $2500.  you get 1/2 of your seminars and advertising expenses reimbursed and 20% of your bonus can go to your assistant.
$6000 State (CA)/ Federal taxes
   Let's see, 36% combined state and federal tax.  What is California state income tax? 8.3% or so.  That means 28% federal?  Either you are a moron and file your own taxes.  Or you are not factoring in deductions, and are paying only on your marginal rate.
$100   Error/ Branch Loss
Total $12200
So Net/Net/Net  is approx. $4466.
I hope that helps you realize where the money goes.
 
As far as 401k's are concerned, I didn't realize you wanted to add in profit sharing and consider it a 401k contribution.  That being said, at 5% profit sharing, your Edward Jones profit sharing this your would have been over 10k last year.  Maybe not as much as you can add to an ownerK, but still nothing to sneeze at.  Just one question though Spiked, now that you pay ALL of your assistant's salary instead of just bonuses, do you have the same complaint about a living wage?

vbrainy's picture
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Joined: 2006-07-26

rankstocks
guess you told him.

spikedkoolaid's picture
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Joined: 2006-04-20

Rankstocks-
I was answering your questions off the top of my head.  Those numbers were as close to actual as I can remember.  I guess you realize that I'm not a liar anymore.  I feel that this forum is one place I can be upfront with how my independant life is so much more fruitful than my w-2 life at Jones. 
A couple of responses.  The $2500 flex spending is exactly what I used to have withdrawn.  This was the one perk that EDJ tried to implement so that high producing IR's could reduce their taxable income so they didn't hit the AMT.  The problem is they just reduced it down to 10% of your previous net. 
As for the living wage, I have no problem attracting and retaining the best and brightest sales assistant.  I pay her $48,000 and then I give her a 15% profit sharing contribution.  That's $60,000/year.  As for paying her salary and profit sharing, she's worth about $100,000/year.  I feel like I'm getting a discount. 
If you would like me to breakdown my indy numbers for you, I can.
$500,000 Gross
92% payout= $460,000
$100,000 Assistant Salary/Rent/Copier/Stamps/Advertising/Etc.
$360,000/Net to Me!
I don't mind paying her at all!!!!!!
 
 

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