Who Still Offers B Shares & Best Bond Funds

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Index annuities are B shares. 

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Ronnie Dobbs wrote:joelv72 wrote:Here's where some people are missing the point of the fee based platform and the whole suitability/fiduciary issue.  I have to admit, I am struggling through it from an indepent RIA viewpoint.  If you are offering a fee platform you are (or soon will be according to the news) held to the fiduciary standard.  Your firms have processed this.  They have formed Investment Committees tasked with the management of the due dilly process for the model portfolios that are ultimately recommended.  A single person couldn't possibly go through the hoops that they are going through and expect to produce at the same time.  If you deviate from the model portfolio, what are the reasons and rationale?  What type/amount of research went into that decision?  I have in front of me right now the Due Diligence Process Manual for a broker/dealer provided platform.  It's 33 pages long and more complex than all get out.  Can you honestly say that you went through as thorough a process as the Investment Committee in coming up with your own model, and then bring that into context of fiduciary responsibility?
 
Actually Jones is going the other way with that. By going fee based with Advisory, we have no fiduciary responsibility, because Jones makes all the decisions. Atleast thats what J-Dub said....
Uhhhhh....That was actually my point.  You are acting as a fiduciary, Jones provides the CYA.

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My bad for mis-reading. I, however, still think the best part of this job is doing the research and building the portfolio. Not very keen to giving that up. After all, that is our job.

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Windy.......there you go thinking again.........that's when mistakes happen

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That avatar is killing me mlgone!  Funniest sh!t I've seen.

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Ronnie Dobbs wrote:Spaceman Spiff wrote: 
Technically that's not accurate.  You could do Advisory on the custom model side.  You have more control over it then.  Granted, you still have to stay within the guidelines with percentages in G/I, G, etc and you can't use individual securities, but if control is what you're looking for then you've got quite a bit of it that way. 
 
If you see Advisory as reducing your role with your clients down to simply babysitting, then you're missing the point of the program altogether.   With my Advisory clients I've become MORE involved with them rather than less.  We just spend more time talking about things other than performance and fund companies.   
 
Spiff I still think Advisory is more for control over our business than anything. I know we have the side that you have "more" control over, but it's no different than having a 401K and having limitations on what you can choose from. Picture this:
 
Spiff has 90% of his book in Advisory. What happens when you have one little quarrel with Jones. You are easily replaced. They boot you out and put someone else in your place to talk about other things, other than their performance, which in reality, is the only reason that client is sitting across the desk from you. To know his performance for the last quarter, month, year...whatever...Take the ability for an advisor to ACTUALLY build a portfolio and you are useless..To me the best part of this job is building the portfolio and doing the research....Maybe thats just me...
 
Speaking of this, I have a good friend who works in the IT department on supporting different programs. We were talking a week or 2 ago and he was telling me about some of the new programs Jones has coming out. Did you know that Jones is working on a system that you put all the parameters in for a client, age, income, etc...and it builds a portfolio for you? Thats control my friend.....
 
I think we should have a real option of fee based. I have LOTS of clients who would go for the fee, if they could trade stocks and swap fund families without any cares. In some cases, it's just a better deal for them...in others..transactional is best. Although I highly agree with a post someone had on here recently, that Bonds should never be wrapped...
Stepping back and looking at the big picture, you make a very good point.  You guys have to remember that technically you are employees of the firm.  It reminds me of the evolution of commercial banking.  Loan officers used to do the loan analysis themselves and present it to loan committee, and ultimately to the board (if it was large enough).  Credit departments sprung up to support loan officers, taking some of the analytical burden off of their shoulders, but the loan officer ultimately called the shots.  Now the tables are turned, and the loan officers are nothing more than paper shufflers taking orders from the credit department.  Which makes me glad I own my own business now.

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3rdyrp2 wrote:That avatar is killing me mlgone!  Funniest sh!t I've seen.
 
it's Mel and Shoe

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mlgone wrote:3rdyrp2 wrote:That avatar is killing me mlgone!  Funniest sh!t I've seen.
 
it's Mel and Shoe
 
I need to start looking at this site at home more often.  The only thing I see in your avatar in the guy with the question mark in his head. 

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Ronnie Dobbs wrote:My bad for mis-reading. I, however, still think the best part of this job is doing the research and building the portfolio. Not very keen to giving that up. After all, that is our job.
 
Picking mutual funds that are approved by EJ is not research or building a portfolio. This is not a shot. I don't do research either.

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Wind - I guess the reason I like advisory is so that I don't have to do all the research.  I can't possibly do enough quality research to improve upon what those analysts do.  It's just not possible for me to run my business, post on here so much, and search the universe of funds for the right combination to use. 
I think in this business you have to figure out what your focus is going to be.  Guys like BondGuy or Gaddock know the investment side of what they do like the back of their hands.  That's why they attract new clients.  I don't really care anymore to get bogged down with whether Keeley is a better small cap manager than American Funds.  OK, well, maybe that wasn't a good example, but you get the point. 
 
I'd rather spend my time doing what I am this morning - working with a client who wants to retire next year and just simply wants to know if she can.  I've got her 401k statement, her budget, her pension statements, her SS statements, her insurance, her 529 plans, etc all scattered all over my desk.  Not one time in this entire conversation with her have we talked about mid-cap funds.  She doesn't care.  She wants to know if she's going to run out of money before she dies.  If using Advisory means that I can focus more on retaining and attracting clients like her, then I'm all for it.

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Spaceman Spiff wrote:mlgone wrote:3rdyrp2 wrote:That avatar is killing me mlgone!  Funniest sh!t I've seen.
 
it's Mel and Shoe
 
I need to start looking at this site at home more often.  The only thing I see in your avatar in the guy with the question mark in his head. 
 
Where do you access this forum from....Communist China?

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Ron 14 wrote:Ronnie Dobbs wrote:My bad for mis-reading. I, however, still think the best part of this job is doing the research and building the portfolio. Not very keen to giving that up. After all, that is our job.
 
Picking mutual funds that are approved by EJ is not research or building a portfolio. This is not a shot. I don't do research either.
 
Ron, many of us use funds at Jones that are NOT part of their approved, preferred, focus, whatever-lists.  We have access to about 75 different fund families, so there's no shortage of options.  However, I wish I had my choice of what funds to use in Advisory, not just the funds they put in the program (which is what I think Windy was getting at).
The problem I have with Advisory is not so much the funds they choose (they are generally pretty good in their categories), but the asset allocation methodology.  I don't necessarily buy into "style-box" investing, which is exactly what Advisory Solutions is.  Not one of my "favorite" funds is in Advisory Solutions, because most of them are not category-specific.  Jones does not choose funds that have much flexibility in approach.  They want to totally control the asset allocation.  I prefer more of a core/satellite approach, and want to be able to tweak my allocations as I see fit.

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Ron 14 wrote:Ronnie Dobbs wrote:My bad for mis-reading. I, however, still think the best part of this job is doing the research and building the portfolio. Not very keen to giving that up. After all, that is our job.
 
Picking mutual funds that are approved by EJ is not research or building a portfolio. This is not a shot. I don't do research either.
 
I work within the guidlines I have, but for the most part we can purchase almost anything Ron. I DO, do my research. I enjoy the whole process.

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Wet_Blanket wrote:Spaceman Spiff wrote:mlgone wrote:3rdyrp2 wrote:That avatar is killing me mlgone!  Funniest sh!t I've seen.
 
it's Mel and Shoe
 
I need to start looking at this site at home more often.  The only thing I see in your avatar in the guy with the question mark in his head. 
 
Where do you access this forum from....Communist China?
No, but I suspect something similar, like an EDJ workstation.

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There are guys like B24 that do things differently at Jones and that's great.  I think B24 is more suited to be an independent, but that will be a decision he'll have to make.Wind - Jones didn't hire you to manage portfolios and select securities for people.  They hired you to grow assets and make money for the firm.  They pay people to do the stuff you want to do.Like Ron said, it's not a dig.  I would like nothing better than to have other people deal with the client side while I simply make investment recommendations.  Jones has the scale to hire people to make investment recommendations and hire brokers to sell it.  That's what you do.  If you want to make investment recommendations you can, like B24 and some others there, but that's not what Jones hired you for.

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Spiff, B24 - Have you heard about this new program that involves, putting in paramaters (age, etc..) and the program builds the portfolio for us? That's the kind of thing I don't like. Advisory is not too far off. I understand Spiff, what you are getting at, but at the same time, you have that retirement conversation once, maybe twice...Everything else is performance. I don't think I have EVER had a client come in for an appt and not wanna talk about their performance.

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Moraen wrote:There are guys like B24 that do things differently at Jones and that's great.  I think B24 is more suited to be an independent, but that will be a decision he'll have to make.Wind - Jones didn't hire you to manage portfolios and select securities for people.  They hired you to grow assets and make money for the firm.  They pay people to do the stuff you want to do.Like Ron said, it's not a dig.  I would like nothing better than to have other people deal with the client side while I simply make investment recommendations.  Jones has the scale to hire people to make investment recommendations and hire brokers to sell it.  That's what you do.  If you want to make investment recommendations you can, like B24 and some others there, but that's not what Jones hired you for.
 
Not arguing that, good point, but that doesn't take away the fact that I run my business how I want, within "Jones" guidelines of course. I sell plenty, but I also greatly enjoy building portfolios. I in no way want to be an analyst, but I think an advisor should be very educated on the process, the investments, and know how to build a portfolio properly. Not just shove them in something. Of course i'm sure everyone does that in the beginning...I enjoy the research, because Spiff....then when that person comes to you and says "Can I retire", you can say, "Yes, you can because, you and I developed the right plan and stuck with it", and not say..."Whew...I'm glad Jones partnered with the right companies!...Good job Advisory committee, you didn't screw me this time!"....

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Ronnie Dobbs wrote:Spiff, B24 - Have you heard about this new program that involves, putting in paramaters (age, etc..) and the program builds the portfolio for us? That's the kind of thing I don't like. Advisory is not too far off. I understand Spiff, what you are getting at, but at the same time, you have that retirement conversation once, maybe twice...Everything else is performance. I don't think I have EVER had a client come in for an appt and not wanna talk about their performance.
 
Can't they go to Fidelity for that and not the the 5%?

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Moraen wrote:There are guys like B24 that do things differently at Jones and that's great.  I think B24 is more suited to be an independent, but that will be a decision he'll have to make.Wind - Jones didn't hire you to manage portfolios and select securities for people.  They hired you to grow assets and make money for the firm.  They pay people to do the stuff you want to do.Like Ron said, it's not a dig.  I would like nothing better than to have other people deal with the client side while I simply make investment recommendations.  Jones has the scale to hire people to make investment recommendations and hire brokers to sell it.  That's what you do.  If you want to make investment recommendations you can, like B24 and some others there, but that's not what Jones hired you for.
 
B24 - I would say you are in the minority of Jones brokers with the way you do things. THE VERY SMALL MINORITY. I think you do things the right way, but a majority of EJ FA's, me included when I was there, looked at the preferred families, the funds available, hit a breakpoint, sell come Corp and Muni's and all is good. There is nothing wrong with that. I am just saying that is how they do things and for people with less than 250k, that is all you really have to do. IMO.

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Spaceman Spiff wrote:It's just not possible for me to run my business, post on here so much, and search the universe of funds for the right combination to use.
 
I'm not sure it's a good thing, that you schedule your day with "posting on here". Maybe you shouldn't post here :) lol. I cut back about 95% of my posting, you can too!!!.You can do it Spiffer...

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Ronnie Dobbs wrote:Spiff, B24 - Have you heard about this new program that involves, putting in paramaters (age, etc..) and the program builds the portfolio for us? That's the kind of thing I don't like. Advisory is not too far off. I understand Spiff, what you are getting at, but at the same time, you have that retirement conversation once, maybe twice...Everything else is performance. I don't think I have EVER had a client come in for an appt and not wanna talk about their performance.
This goes back to my commercial bank analogy.  You walk into a retail Bank of America branch in my neck of the woods and the "branch manager" is more than likely to be less than 35 years old and more than likely not have a college degree.  That's because people with more experience/education would not take that job because of the hours, pay, and sucktitude.  If EDJ (or any other captive B/D for that matter) could really have their way, that would be their model, because more money would flow to the top.  Their one hindrance is FINRA and the examinations, which the average joe just cant hurdle.  I hear alot of bitching about FINRA, but without them, captive reps would start looking like McDonald's fry cooks pretty darn quick.

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Ronnie Dobbs wrote:Spiff, B24 - Have you heard about this new program that involves, putting in paramaters (age, etc..) and the program builds the portfolio for us? That's the kind of thing I don't like. Advisory is not too far off. I understand Spiff, what you are getting at, but at the same time, you have that retirement conversation once, maybe twice...Everything else is performance. I don't think I have EVER had a client come in for an appt and not wanna talk about their performance.
 
I have heard about a program like that.  Not sure how far down the road it is, but I believe they're working on it.  I think whatever that software looks like it will end up being kind of like Advisory where you can just simply click OK and go for it, or you can pick and choose what part of their scenario you really want to use.  I can't imagine them actually telling us to use Fund A over Fund B.  I can see them telling us to put 10% in LC Growth and give us a list of LC Growth funds to pick from. 
 
I've also heard about an Advisory type account, there's a name for it that escapes me right now, that they're working on that would allow stocks, funds, bonds, UITs, CEFs, ETFs, etc all in one account.  The GP that told us about it said that it's in the near future.  That was pretty vague, but at least they're thinking about it. 
 
I agree that people want to know about performance.  But, they don't typically want to hear the specifics.  Give them the bottom line, something to compare it to, and they're happy. 
 
You need to have that retirement conversation annually.  Lots of things can change in a year.  It might just be a review to find out if you're still on track for their goals, but if you have the conversation with they've 50 and then again at 55, you're going to miss something.  And there are lots of other things to talk about besides retirement.   It's those other things that can really become meaningful to your clients. 

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Spaceman Spiff wrote:Ronnie Dobbs wrote:Spiff, B24 - Have you heard about this new program that involves, putting in paramaters (age, etc..) and the program builds the portfolio for us? That's the kind of thing I don't like. Advisory is not too far off. I understand Spiff, what you are getting at, but at the same time, you have that retirement conversation once, maybe twice...Everything else is performance. I don't think I have EVER had a client come in for an appt and not wanna talk about their performance.
 
I have heard about a program like that.  Not sure how far down the road it is, but I believe they're working on it.  I think whatever that software looks like it will end up being kind of like Advisory where you can just simply click OK and go for it, or you can pick and choose what part of their scenario you really want to use.  I can't imagine them actually telling us to use Fund A over Fund B.  I can see them telling us to put 10% in LC Growth and give us a list of LC Growth funds to pick from. 
 
I've also heard about an Advisory type account, there's a name for it that escapes me right now, that they're working on that would allow stocks, funds, bonds, UITs, CEFs, ETFs, etc all in one account.  The GP that told us about it said that it's in the near future.  That was pretty vague, but at least they're thinking about it. 
 
I agree that people want to know about performance.  But, they don't typically want to hear the specifics.  Give them the bottom line, something to compare it to, and they're happy. 
 
You need to have that retirement conversation annually.  Lots of things can change in a year.  It might just be a review to find out if you're still on track for their goals, but if you have the conversation with they've 50 and then again at 55, you're going to miss something.  And there are lots of other things to talk about besides retirement.   It's those other things that can really become meaningful to your clients. 
Unified Managed Account (UMA)

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I don't believe that's a Unified Managed Account.  Only thing I've ever seen in an UMA is multiple sub-advisors (SMAs) with maybe an ETF here or there.
 
I think Spiff is referring to an Advisor (FA) Directed Account or Client Directed Account - basically a fee based account that you can practically by everything in.

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Wet_Blanket wrote:I don't believe that's a Unified Managed Account.  Only thing I've ever seen in an UMA is multiple sub-advisors (SMAs) with maybe an ETF here or there.
 
I think Spiff is referring to an Advisor (FA) Directed Account or Client Directed Account - basically a fee based account that you can practically by everything in.
Hell, I have yet to open one, but here's Investopedia's take:
 
http://www.investopedia.com/terms/u/uma.asp
 

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Stupid meaning good?

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If you want to manage money then go get your CFA.  The Series 7 does not qualify you to actively manage people's retirement accounts.  There are specialists with a crapload more education than you and a sh*tton more experience who do this for a living.  If you are a broker you are not managing money for a living, you are doing sales and customer service.Spiff hit the nail on the head when he said he looks at all the pieces of someone's financial puzzle and pieces them together but farms out the portfolio management to people more qualified to do that.  If you're picking funds for people in their retirement portfolio you're doing them a disservice.

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BerkshireBull wrote:If you want to manage money then go get your CFA.  The Series 7 does not qualify you to actively manage people's retirement accounts.  There are specialists with a crapload more education than you and a sh*tton more experience who do this for a living.  If you are a broker you are not managing money for a living, you are doing sales and customer service.Spiff hit the nail on the head when he said he looks at all the pieces of someone's financial puzzle and pieces them together but farms out the portfolio management to people more qualified to do that.  If you're picking funds for people in their retirement portfolio you're doing them a disservice.

 
What do you know about my plans or my knowledge? I am already enrolled in the AAMS course, then i'm going for my CFP. Aswell, as plans on getting my PHD in Finance. How about you stop being a d***....Theres a start.....

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Isn't the AAMS an open-book test?  There's a couple of Jonsers in my market with that credential and I can't see that it's made a damn bit of difference in their ability to manage money.

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Indyone wrote:Isn't the AAMS an open-book test?  There's a couple of Jonsers in my market with that credential and I can't see that it's made a damn bit of difference in their ability to manage money.

 
The AAMS is required at Jones to move to Seg 4. I've skimmed over the books i recieved for the course, and it can definitly be worth it, if you actually study it. Anyone who has gone to college knows there are 2 kinds of students. The nes who passively get through and the ones who actually study and become very knowledgable. I'm not doing anything just for the designation. As i've said, i very much enjoy the process of building a portflio and want to learn all I can.

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I've got the AAMS on my card and NOBODY has ever even recognized it.  I think Jones made it a requirement so that all of their FAs will eventually have some initials behind their name.  They can't call us VPs or Regional Marketing Directors or some lame made up name like they do at other companies, so they did the AAMS thing.  Some folks used to call it CFP lite, but it's not even close.  A good, long weekend with some study time and you're ready to go.
 
Wind - kudos for wanting to learn and enjoy the process of portfolio building.  I used to feel the exact same way.  I wanted to learn about MPT, loved talking with Ice about ETFs vs funds, and just got way too far into the weeds when I was trying to construct a portoflio.  One day when I was sitting in my office at 6:30pm, trying to get a portfolio perfectly balanced, lots of alpha and as little SD as possible showing on the reports, I realized that I'd never be able to get as good as the folks at our HQ who already have their CFAs and lots of other experience to boot.  Not without going back to school or spending the next 5 years in the home office working my way up to the analyst level.  I suddenly became not so interested. 
 
You may be just the opposite and can't live without the academia of portfolio building.  Just make sure that you balance your time between building your book and building your knowledge base.  Jones will terminate a CFP who's on goals just as quickly as they will anyone else.   

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Ronnie Dobbs wrote:BerkshireBull wrote:If you want to manage money then go get your CFA.  The Series 7 does not qualify you to actively manage people's retirement accounts.  There are specialists with a crapload more education than you and a sh*tton more experience who do this for a living.  If you are a broker you are not managing money for a living, you are doing sales and customer service.Spiff hit the nail on the head when he said he looks at all the pieces of someone's financial puzzle and pieces them together but farms out the portfolio management to people more qualified to do that.  If you're picking funds for people in their retirement portfolio you're doing them a disservice.

 
What do you know about my plans or my knowledge? I am already enrolled in the AAMS course, then i'm going for my CFP. Aswell, as plans on getting my PHD in Finance. How about you stop being a d***....Theres a start.....
 

The AAMS is a total joke. It isn't even CFP lite, which some refer to it as. It is a total waste and it isn't recognized by anyone. The AAMS and CFP have absolutely zero influence on the management of money. The CFP doesn't help you pick stocks, funds, trades or anything. It is for financial planning not financial analysis. If you have taken the CFP classes you can pass the AAMS tests without buying the books.

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Ok, let me ask you guys a question.
 
If conventional wisdom is that the majority of an investor's performance is dictated by their investment behavior and their asset allocation vs. the actual investments they hold, then why worry so much about whether your corporate office picks the funds or you do.
 
I think most people would say that the explosion of ETF's and Indexing has really shown that the majority of investors prefer that over individual stock picking. That and the fact that very very few people (and certainly not any Financial Advisors) can 'stockpick' better than professional money managers over the long haul. Even money managers have trouble beating the 'market' over the long haul. The risk adjusted return of actively managed funds, I would argue, is better, but that is certainly an ongoing debate.
 
I'm not digging on EDJ or anything because I don't see any problem with that. To wit, I think it makes alot of sense to not have to design the portfolio of every account. The possible exception is that if you cannot trade individual securities in the account that would bother me if I had clients that traded alot but then, they are traders and not investors for the most part.
 
I can't speak for Gaddock or anyone else, but I know that professional money managers have alot more experience, understanding, and resources than any of us do at 'picking' investments.
 
I honestly think one of the biggest problems with our industry stems from people like Windy who have been in the business less than 5 years and think they can 'out-pick' the professionals. They have just enough knowledge to get in trouble. There is ZERO chance that he can outperform any index or Managed Fund on a risk adjusted basis over a 5+ year span.
 
 

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LSUAlum wrote:Ok, let me ask you guys a question.
 
If conventional wisdom is that the majority of an investor's performance is dictated by their investment behavior and their asset allocation vs. the actual investments they hold, then why worry so much about whether your corporate office picks the funds or you do.
 
I think most people would say that the explosion of ETF's and Indexing has really shown that the majority of investors prefer that over individual stock picking. That and the fact that very very few people (and certainly not any Financial Advisors) can 'stockpick' better than professional money managers over the long haul. Even money managers have trouble beating the 'market' over the long haul. The risk adjusted return of actively managed funds, I would argue, is better, but that is certainly an ongoing debate.
 
I'm not digging on EDJ or anything because I don't see any problem with that. To wit, I think it makes alot of sense to not have to design the portfolio of every account. The possible exception is that if you cannot trade individual securities in the account that would bother me if I had clients that traded alot but then, they are traders and not investors for the most part.
 
I can't speak for Gaddock or anyone else, but I know that professional money managers have alot more experience, understanding, and resources than any of us do at 'picking' investments.
 
I honestly think one of the biggest problems with our industry stems from people like Windy who have been in the business less than 5 years and think they can 'out-pick' the professionals. They have just enough knowledge to get in trouble. There is ZERO chance that he can outperform any index or Managed Fund on a risk adjusted basis over a 5+ year span.
 
 
 
Or maybe it's people like you who can't read. I never said i could outperform a managed fund. I said i enjoy the process and want to learn as much as possible about it myself. Then again, whats the good in picking a managed fund, if you don't understand what you are looking at.....Thats my point LSU....You guys seem to always have it out for newer people, willing to learn more than most.....Always with the "Know enough to be dangerous" speech.  Enough already. I don't do things the same as you, nor will I ever. I hae my way of doing things that has worked out very well for me and i'll continue on my path to Seg 4. I enjoy the research of funds/stocks/etc...You don't or don't believe you can do well. That's fine, but thats no reason to doubt my abilities to learn.

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Continue to do all the research you want. The CFP won't help you with any of it.

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Ron 14 wrote:Continue to do all the research you want. The CFP won't help you with any of it.
 
Love the new signature Ron!

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Mr.Blonde wrote:Ron 14 wrote:Continue to do all the research you want. The CFP won't help you with any of it.
 
Love the new signature Ron!
 
Ron would have no existance if he didn't cut jokes at me....

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Ronnie Dobbs wrote:Mr.Blonde wrote:Ron 14 wrote:Continue to do all the research you want. The CFP won't help you with any of it.
 
Love the new signature Ron!
 
Ron would have no existance if he didn't cut jokes at me....Another keyboard ruined.

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Ronnie Dobbs wrote:LSUAlum wrote:Ok, let me ask you guys a question.
 
If conventional wisdom is that the majority of an investor's performance is dictated by their investment behavior and their asset allocation vs. the actual investments they hold, then why worry so much about whether your corporate office picks the funds or you do.
 
I think most people would say that the explosion of ETF's and Indexing has really shown that the majority of investors prefer that over individual stock picking. That and the fact that very very few people (and certainly not any Financial Advisors) can 'stock pick' better than professional money managers over the long haul. Even money managers have trouble beating the 'market' over the long haul. The risk adjusted return of actively managed funds, I would argue, is better, but that is certainly an ongoing debate.
 
I'm not digging on EDJ or anything because I don't see any problem with that. To wit, I think it makes alot of sense to not have to design the portfolio of every account. The possible exception is that if you cannot trade individual securities in the account that would bother me if I had clients that traded alot but then, they are traders and not investors for the most part.
 
I can't speak for Gaddock or anyone else, but I know that professional money managers have alot more experience, understanding, and resources than any of us do at 'picking' investments.
 
I honestly think one of the biggest problems with our industry stems from people like Windy who have been in the business less than 5 years and think they can 'out-pick' the professionals. They have just enough knowledge to get in trouble. There is ZERO chance that he can outperform any index or Managed Fund on a risk adjusted basis over a 5+ year span.
 
 
 
Or maybe it's people like you who can't read. I never said i could outperform a managed fund. I said i enjoy the process and want to learn as much as possible about it myself. Then again, whats the good in picking a managed fund, if you don't understand what you are looking at.....Thats my point LSU....You guys seem to always have it out for newer people, willing to learn more than most.....Always with the "Know enough to be dangerous" speech.  Enough already. I don't do things the same as you, nor will I ever. I hae my way of doing things that has worked out very well for me and I'll continue on my path to Seg 4. I enjoy the research of funds/stocks/etc...You don't or don't believe you can do well. That's fine, but thats no reason to doubt my abilities to learn.

I applaud you for wanting to learn. What I was commenting on was your disdain for the way EDJ handles their advisory accounts. The fact that you wanted control, to presumably pick better securities for your clients, is what concerns me. Admittedly, I would want a platform that allowed me to handle individual equities based on my clients' needs / wants. I can understand that. What concerns me is that instead of say, trying to figure out what allocations your advisory accounts are allocated to by your corporate office, you want to figure it out on your own. That shows a bit of arrogance. Hence the 'enough to be dangerous' comments.
 
In the four stages of learning (unconscious incompetence, conscious incompetence, conscious competence, and unconscious competence) you are on the first stage still. That's the dangerous part.

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The problem with so-called "professional money managers" and investment policy committees, etc. is the theory behind what they are doing.  For some reason, most of them (excluding certain types of mutual funds) are benchmarking themselves, and trying to match or beat, an arbitrary index.  I am so adamantly opposed to managing money this way.  I do not claim to me able to ever pick the "winning stocks" better than many (most) of the fund managers out there.  I have neither the time nor the resources.  However, it is more important to MY CLIENTS that they meet their goals.  If that means slightly underperforming the "indexes" for many years, I am OK with that as long as when the big "game changer" comes along, I don't lose their shirts and forever change their financial lives.
 
You must understand the inherent conflict with professional money management.  Money managers (SMA's, funds, ETF's, etc.) get paid to manage money.  The more money, the more they get paid.  The better the performance, the more money flows in, the more they earn.  In addition, this is more money ot the management company as well, thus they must satisfy their bosses AND their wallets.  But they are MORE concerned about losing their jobs.  So what many fund managers do is essentially track the indexes, and then attempt to add some alpha with various bets on top of it.  Won't win by too much, but won't lose by too much.  Not too risky.  So this is why MOST actively managed funds can't beat their index...they are essentially tracking it, with higher expenses, and a 50/50 shot of beating it or missing it, depending on how those little bets work out.  So in many cases (especially if you are a "stylebox" investor), just buying the low-cost index fund or ETF makes the most sense.
 
IN ADDITION, most funds that experience some unusual success for a year or two will witness a huge influx of cash.  And as we all know, if your prospectus is narowly defined (ex: must invest in mid-cap US equities, and be 80%+ invested at all times), this can seriously reduce your ability to bring any alpha to the table, as you need to make pretty big bets to have any impact on the portfolio.  So what to do?  Just add more to the "index" positions.  Why do you think nearly every large-cap U.S. equity fund always has the same positions in the top 10?  Let's see....Microsoft, GE, P&G, IBM, XOM, JnJ, shall we go on?  I can tell you, if every damn LC fund has all these same positions, this thing ain't gonna be outperforming anything.
 
Now, I am NOT saying not to use money managers.  That's all I use.  But you have to be intelligent about the way you design a portfolio.  At Jones, if I invested my clients' money the way they honestly answered a risk-tolerance questionnaire, my 55 year-old clients would be in 70% equities.  70%!!  That's ludicrous!  There is absolutely no need for them to be 70% equities.  In my book, they MIGHT be 50% of they were definitely working another 10 years.  And even then, it would depend on the economic landscape.  I'm not sure why Jones is so pro-equities.  This is the case even in advisory, where it doesn't matter WHAT they aer invested in.  It's the same fee.

SometimesNowhere's picture
Joined: 2008-12-22

B24 wrote:The problem with so-called "professional money managers" and investment policy committees, etc. is the theory behind what they are doing.  For some reason, most of them (excluding certain types of mutual funds) are benchmarking themselves, and trying to match or beat, an arbitrary index.  I am so adamantly opposed to managing money this way.  I do not claim to me able to ever pick the "winning stocks" better than many (most) of the fund managers out there.  I have neither the time nor the resources.  However, it is more important to MY CLIENTS that they meet their goals.  If that means slightly underperforming the "indexes" for many years, I am OK with that as long as when the big "game changer" comes along, I don't lose their shirts and forever change their financial lives.
 
You must understand the inherent conflict with professional money management.  Money managers (SMA's, funds, ETF's, etc.) get paid to manage money.  The more money, the more they get paid.  The better the performance, the more money flows in, the more they earn.  In addition, this is more money ot the management company as well, thus they must satisfy their bosses AND their wallets.  But they are MORE concerned about losing their jobs.  So what many fund managers do is essentially track the indexes, and then attempt to add some alpha with various bets on top of it.  Won't win by too much, but won't lose by too much.  Not too risky.  So this is why MOST actively managed funds can't beat their index...they are essentially tracking it, with higher expenses, and a 50/50 shot of beating it or missing it, depending on how those little bets work out.  So in many cases (especially if you are a "stylebox" investor), just buying the low-cost index fund or ETF makes the most sense.
 
IN ADDITION, most funds that experience some unusual success for a year or two will witness a huge influx of cash.  And as we all know, if your prospectus is narowly defined (ex: must invest in mid-cap US equities, and be 80%+ invested at all times), this can seriously reduce your ability to bring any alpha to the table, as you need to make pretty big bets to have any impact on the portfolio.  So what to do?  Just add more to the "index" positions.  Why do you think nearly every large-cap U.S. equity fund always has the same positions in the top 10?  Let's see....Microsoft, GE, P&G, IBM, XOM, JnJ, shall we go on?  I can tell you, if every damn LC fund has all these same positions, this thing ain't gonna be outperforming anything.
 
Now, I am NOT saying not to use money managers.  That's all I use.  But you have to be intelligent about the way you design a portfolio.  At Jones, if I invested my clients' money the way they honestly answered a risk-tolerance questionnaire, my 55 year-old clients would be in 70% equities.  70%!!  That's ludicrous!  There is absolutely no need for them to be 70% equities.  In my book, they MIGHT be 50% of they were definitely working another 10 years.  And even then, it would depend on the economic landscape.  I'm not sure why Jones is so pro-equities.  This is the case even in advisory, where it doesn't matter WHAT they aer invested in.  It's the same fee.
 
Intellectual laziness. It takes work and the willingness to say that the business has fundamentally changed since the 50's. Things we thought were true aren't, and that's a hard pill to swallow, especially if you are an organization that has been training thousands of brokers a year to embrace the bias.

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I don't think things have changed.  The risks have always been there.  Hoenstly, I think Jones really believes in equities for the long-term.  Don't get me wrong.  I agree that over the long-haul, quality equities (which is what they advocate, which is good) will outperform bonds.  However, most of our clients are not 35, and won't stay invested in the same stuff for 30 years.  So I guess investor attitude has changed.  Most of our clients are boomers and older, and their time horizon is NOW.  Or at least until the next big bear market.  They can't afford to recover from a 20% or 30% or 40% drop when they are taking withdrawals.

 
I think the whole investor psychology/time horizon thing is what trips up Jones IMHO.  They follow the whole Jeremy Siegel thing.  Stocks for the long run.  That's fine.  But who gives a fukc about a 70-year mountain chart??  10 years is about how far we can afford to look for clients.  And for those that are at or near retirement, we have to look at drawdowns (any timeframe), not 1-year or 3-year or 30-year returns.  And we cannot forget COMPOUND returns, not AVERAGE returns.  It's about the money stupid, not the %.

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If someone is 55 years old they should be in 70% equities. With life expectancy in the early to mid-80's now (and presumably higher in the future) your client can't afford not to be heavily weighted in equities. Their purchasing power will be radically different if they are not. Dividend growth is the best way to protect their purchasing power. I could honestly argue that at that point (55 and still working with 5-10 years till retirement) that they could easily support being 80-90% in equities.
 
In fact, even in this so-called lost decade, dividend paying stocks in the S&P have yielded over 5% with dividends reinvested.
 
I don't think this decade taught us that buy and hold is dead (like some say). I think this decade showed us that 1) you need to save your way into retirement not invest your way and that 2) Good ole fashioned buy and hold works with DIVIDEND paying stocks.
 
Fundamentally most people are UNDER allocated to stocks and within their equity allocations UNDER allocated to dividend paying stocks.

SometimesNowhere's picture
Joined: 2008-12-22

LSUAlum wrote:If someone is 55 years old they should be in 70% equities. With life expectancy in the early to mid-80's now (and presumably higher in the future) your client can't afford not to be heavily weighted in equities. Their purchasing power will be radically different if they are not. Dividend growth is the best way to protect their purchasing power. I could honestly argue that at that point (55 and still working with 5-10 years till retirement) that they could easily support being 80-90% in equities.
 
In fact, even in this so-called lost decade, dividend paying stocks in the S&P have yielded over 5% with dividends reinvested.
 
I don't think this decade taught us that buy and hold is dead (like some say). I think this decade showed us that 1) you need to save your way into retirement not invest your way and that 2) Good ole fashioned buy and hold works with DIVIDEND paying stocks.
 
Fundamentally most people are UNDER allocated to stocks and within their equity allocations UNDER allocated to dividend paying stocks.
 
I read somewhere that if you must be invested in equities that you can't afford to be invested in equities.
 
I agree with the dividend paying stock thing, if you must (or want to, or whatever) own stocks you should find something with a decent dividend. The trade off offered by companies that don't pay dividends to their shareholders is unfairly biased to the company, and therefore doesn't appropriately compensate the investor for the use of their money.
 

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SometimesNowhere wrote:LSUAlum wrote:If someone is 55 years old they should be in 70% equities. With life expectancy in the early to mid-80's now (and presumably higher in the future) your client can't afford not to be heavily weighted in equities. Their purchasing power will be radically different if they are not. Dividend growth is the best way to protect their purchasing power. I could honestly argue that at that point (55 and still working with 5-10 years till retirement) that they could easily support being 80-90% in equities.
 
In fact, even in this so-called lost decade, dividend paying stocks in the S&P have yielded over 5% with dividends reinvested.
 
I don't think this decade taught us that buy and hold is dead (like some say). I think this decade showed us that 1) you need to save your way into retirement not invest your way and that 2) Good ole fashioned buy and hold works with DIVIDEND paying stocks.
 
Fundamentally most people are UNDER allocated to stocks and within their equity allocations UNDER allocated to dividend paying stocks.
 
I read somewhere that if you must be invested in equities that you can't afford to be invested in equities.
 
I agree with the dividend paying stock thing, if you must (or want to, or whatever) own stocks you should find something with a decent dividend. The trade off offered by companies that don't pay dividends to their shareholders is unfairly biased to the company, and therefore doesn't appropriately compensate the investor for the use of their money.
 

I disagree with the 'if you must be invested in equities then you can't afford to be' unless you are very near your 70+ birthdate. When you have roughly 10 years left in your horizon then your concerns about purchasing power degradation are much lower and fixed income and lower volatility surpass it on importance. Prior to that though, your primary long term concern is purchasing power degradation.
 
I also am not so much conerned about the current yield on the equity as much as the divedend stability and growth. I'd rather a 2.5% yield with 10% dividend growth than 6.0% with 1% growth over the long haul.

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LSUAlum wrote:If someone is 55 years old they should be in 70% equities. With life expectancy in the early to mid-80's now (and presumably higher in the future) your client can't afford not to be heavily weighted in equities. Their purchasing power will be radically different if they are not. Dividend growth is the best way to protect their purchasing power. I could honestly argue that at that point (55 and still working with 5-10 years till retirement) that they could easily support being 80-90% in equities.
 
In fact, even in this so-called lost decade, dividend paying stocks in the S&P have yielded over 5% with dividends reinvested.
 
I don't think this decade taught us that buy and hold is dead (like some say). I think this decade showed us that 1) you need to save your way into retirement not invest your way and that 2) Good ole fashioned buy and hold works with DIVIDEND paying stocks.
 
Fundamentally most people are UNDER allocated to stocks and within their equity allocations UNDER allocated to dividend paying stocks.
 
I agree with your ascertion about dividend paying stocks.  Hence my commetn on "quality" stocks (that is my basic definition).  However, I do not agree on your underlying theory on allocation to equities.  I am not going to argue it, since I know many people are of the same persuasion.  My biggest obstacle to buying and holding large amounts of equities for someone 55+ is the potential black swan effect and the market valuation problem.  Investing in equities when the market is highly overvalued has zero chance historically of working.  Now, if you were actively invested, and the market was at a P/E of 8 or 10 or 12 (which happens at the beginning of most bull markets, and the end of most bear markets), then you will be handsomely rewarded.  However, if you were 55-60 yrs old, and the market had grown to a P/E of 20-25+, your future prospects are dim at best.  This can't be disputed.  It is pure market cycle economics.  Bascially, market P/E changes dictate large variances from the mean over time.  It's just how it works.  Now, it's tough to know the depth, breadth, and length of bulls and bears.  And even if you have no interest in timing the market, or investing based on these principles, you need to understand that unless you know you are at the front of a long-term bull market, you need to have more diversification than just 70-90% equities.  What if your client is 60, and they are 85% equities, and the market loses like 45%?  So their nest egg goes from 750,000 to $450,000.  Do you just hope that it comes back quickly?  Like 65% back?  What if we enter a 10 year cycle of sideways growth after that 45% collapse?  THEN what do you do?  Look at the 70's.  Look at Japan.
 
For the most part, most equity classes are very highly correlated.  Yes, some will return more or less than others.  But in a big bear market, it doesn't matter how well your equities are diversified.  Clients don't need 25% returns.  They need to modestly exceed inflation and not lose money. 
 
Now, for your clients' "never money" (meant for inheritance, or to be saved for 25 years down the road), equities are the way to go.  Some solid dividend payers/growers and just let them reinvest in perpetuity. 
 
But to tell a client getting ready to retire to just "trust me, hang in there"?  That's a tough sell.  It would be interesting to see if after the 50% +/- drop on the S&P, DOW, EAFE, etc., if the market just stagnated for a few years instead of exploding, how many clients would be feeling OK???  The scene would be much different.

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Check this out.......
U.S Stock Market*1884 – 2009Rolling 3-Year Holding Periods753 Observations

When the beginning (Schiller) P/E is…

11.54 or less
19.20 or more

Median 3-Year Return (annualized) 

16.20%
6.85%

Average 3-Year Return (annualized)

17.03%
7.07%

% of Periods with Negative Return

0.00%
28.10%

Best 3-Year Return (total) 

194.52%
134.08%

Worst 3-Year Return (total) 
0.85%
(80.84%)

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B24 - what P/E do you look at ? Current P/E ? What source ?
 
You may be starting to influence me on this !

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P/E10.  Robert Schiller.  Basically the average P/E for the past 10 years.  It removes the noise from wacky years.  For example, at one point the P/E in early 2008 was like 120 or something because earnings earnings were so bad, and the market tumble was relatively recent (not priced into the TTM).  Because of the bizarre and massive losses at banks, the aggregate S&P actually had negative earnings one quarter.  This is not relevant.  Taking the trailing 10 year earnings wipes away the noise.  Keep in mind, this is NOT an exact science, and it is NOT perfect, and it should NOT be your only investment benchmark.  See excerpt from below:
 
Background A standard way to investigate market valuation is to study the historic Price-to-Earnings (P/E) ratio using reported earnings for the trailing twelve months (TTM). Proponents of this approach ignore forward estimates because they are often based on wishful thinking, erroneous assumptions, and analyst bias.
The "price" part of the P/E calculation is available in real time on TV and the Internet. The "earnings" part, however, is more difficult to find. The authoritative source is the Standard & Poor's website, where the latest numbers are posted on the earnings page. Click on the Index Earnings link in the right hand column. Free registration is now required to access the data. Once you've downloaded the spreadsheet, see the data in column D.
The table here shows the TTM earnings based on "as reported" earnings and a combination of "as reported" earnings and Standard & Poor's estimates for "as reported" earnings for the next few quarters. The values for the months between are linear interpolations from the quarterly numbers.
The average P/E ratio since the 1870's has been about 15. But the disconnect between price and TTM earnings during much of 2009 was so extreme that the P/E ratio was in triple digits — as high as 122 — in the Spring of 2009. At the top of the Tech Bubble in 2000, the conventional P/E ratio was a mere 30. It peaked north of 47 two years after the market topped out.
As these examples illustrate, in times of critical importance, the conventional P/E ratio often lags the index to the point of being useless as a value indicator. "Why the lag?" you may wonder. "How can the P/E be at a record high after the price has fallen so far?" The explanation is simple. Earnings fell faster than price. In fact, the negative earnings of 2008 Q4 (-$23.25) is something that has never happened before in the history of the S&P 500.
The P/E10 Ratio Legendary economist and value investor Benjamin Graham noticed the same bizarre P/E behavior during the Roaring Twenties and subsequent market crash. Graham collaborated with David Dodd to devise a more accurate way to calculate the market's value, which they discussed in their 1934 classic book, Security Analysis. They attributed the illogical P/E ratios to temporary and sometimes extreme fluctuations in the business cycle. Their solution was to divide the price by the 10-year average of earnings, which we'll call the P/E10. In recent years, Yale professor Robert Shiller, the author of Irrational Exuberance, has reintroduced the P/E10 to a wider audience of investors. As the accompanying chart illustrates, this ratio closely tracks the real (inflation-adjusted) price of the S&P Composite. The historic P/E10 average is 16.3.
The Current P/E10 After dropping to 13.4 in March 2009, the P/E10 has rebounded above 20. The chart below gives us a historical context for these numbers. The ratio in this chart is doubly smoothed (10-year average of earnings and monthly averages of daily closing prices). Thus the fluctuations during the month aren't especially relevant (e.g., the difference between the monthly average and monthly close P/E10).

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