AG Edwards "Preferred Mutual Funds"

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Lance Legstrong's picture
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Joined: 2005-01-12

Maybe y'all can help me with question.  We all know about EDJ "preferred mutual funds" and the revenue sharing havic.   Does AGE have similiar arrangements with mutual funds?  If so can someone either post or PM me the list of mutual funds that get preferred and/or preferential treatment at AGE?
Merry Christmas to All!
Lance

VABroker's picture
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Joined: 2005-04-26

I'm an AG Edwards Broker.  We are not incentivized or directed to sell any fund family over another.  We even have many no loads available to us through our pfa (fee based program).

Lance Legstrong's picture
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Joined: 2005-01-12

VA,
Thanks, let me re-phrase a little; Does anyone know if AGE recieves extra revenue (beyond 12b1 fees) from mutual fund companies under revenue sharing agreements? 
Whether or not AGE shares any of this revenue share with the reps is another question.
I am speculating that "YES" AGE is involved in revenue sharing from various mutual fund companies and "NO" they do not share this revenue with the broker.
How could they say NO to the money (a lot of money) when it would be readily available to the firm?  Of course the brokers only can fight over the money they know about!
Let me know what y'all think!
Thanks
 
Lance
 
 

Greenbacks's picture
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Joined: 2004-12-21

Lance all BD's receive what is called sub TA fees from fund companies. I have access to Schwab's web site that lets me know how much a fund pays to the BD. The only two funds that do not pay a Sub TA fee are Vanguard and Dimensional funds. That is why I keep most of my clients in these funds!  Most of the Sub TA fees range from .20% up to .85%. I do most of my 401k business through Schwab this allows the sponsor to collect the sub TA fee to pay for the form 5500 and other fees!  So if you have a five million dollar 401k and the funds average .35% of sub TA fees thats $17,500 that will go to the funds expenses and pay part of my fees!  Most BD's will allow the funds that pay the highest Sub TA fees to trade without a ticket charge this goes for Schwab and E-trade and all discount brokers! If the discount BD's and the other BD's can get billions of dollars into these funds you can do the math it is a lot of revenue!
Hope this answers your questions!

VABroker's picture
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Joined: 2005-04-26

Yes the firm gets revenue sharing but I'm not sure what effect it has. 
None of our brokers could tell you what fund company pays what. 
So the important thing is that the revenue sharing does not affect our decision making process unlike the 7 preferred families or proprietary products at other firms.

noggin's picture
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Joined: 2004-11-30

VAbroker- Wrong answer.....

troll's picture
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Joined: 2004-11-29

noggin wrote:VAbroker- Wrong answer.....
and why is that the wrong answer?

babbling looney's picture
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Joined: 2004-12-02

My BD has a list of "preferred" funds.  I don't get paid any differently if I use one of them or any other of the 100s of fund families we have a selling agreement with.  I do have different ticket charges if the trade is placed in a brokerge account, but a $5 differential certainly isn't going to sway my decision on what fund I am going to use.  If that was a big deal, I'd always go direct to the fund family and skip any ticket charges.
I suppose the additional ticket charge is to make up for the non revenue sharing funds.  As Greenbacks said, all firms participate in revenue sharing for preferred status.  The same thing is true of the product placement at your local grocery store.  Ever wonder why some brands of cereal etc are at eye level instead of at your ankles?  They pay the grocery chain a fee for preferred shelf space. 

csmelnix's picture
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Joined: 2005-06-01

Typically the difference in ticket charges for mfunds is determined but the fund company and how much of the transactional charges they're willing to absorb - it's typically not based on any revenue sharing arrangement.  There are some other variables that may go in to the "preferred" title like access to mangers, reporting requirements, ability to feed information etc.. but it doesn't involve exclusive selling like at other "firms" that will remain nameless.

exdrone's picture
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Joined: 2005-07-01

babbling looney wrote:
I suppose the additional ticket charge is to make up for the non revenue sharing funds.  As Greenbacks said, all firms participate in revenue sharing for preferred status.  The same thing is true of the product placement at your local grocery store.  Ever wonder why some brands of cereal etc are at eye level instead of at your ankles?  They pay the grocery chain a fee for preferred shelf space. 

This is true, but I think there needs to be some clarification because the criminals at a certain firm have used this argument to justify rev sharing.  Yes companies pay for product placement, but the other cereals area at least located in the same aisle.  At the unmentioned firm the choice products are all placed together in the front of the store, and the rest are kept in a back room that has no lights or windows.  Hope you have a flashlight when you shop, because they sure as heck aren't going to help you find them.
 

dude's picture
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Joined: 2005-11-15

Lance is hunting for ghosts.  I have worked for the King of Proprietary Funds (Morgan) as well as a bank (WM Funds from Washington Mutual) and know intimately what it's like to have very clear pressure to sell firm product.  AGE is nowhere near or even in the same galaxy as Morgan, when it comes to "preferred vendors".  I have never even been made aware of a preferred list.  AGE's menu doesn't highlight any particular fund family or emphasize any particular product that I've been made aware of.  If there is a preferred list, it certainly is not pushed.
Noggin said:
VAbroker- Wrong answer.....
Reply:
Who is this joker?  He deserves an award for being articulate.

Lance Legstrong's picture
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Joined: 2005-01-12

Yo Dude (btw that is a goofy screen name, how can anyone take you seriously?)
Are you old enough to be on this board?  Any way when you are done blowing you dubie and off your skateboard maybe you can re-read my initial post.
I am not "hunting" I was just asking.   It sounds like AGE made a concious decision to pocket the cash from the revenue sharing (aka shelf space) practices and cut the brokers out.  At least EDJ the let the brokers play in the sand box at the beach with some of their cash!
I think I am going to start calling you "Goofy Dude"
You're a Goofy Dude in Goofy Mood!
A Crazy Cat to Talk Like That!
Cheers
Lance!
 
 
 
 
 

Soothsayer's picture
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Joined: 2005-02-24

Lance--
Are you sure that you're not Player's younger brother?

Uptick1's picture
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Joined: 2004-12-06

Lets put things into perspective.
I think a quick answer to this question is to the best of my knowledge ALL firms receive some form of revenue sharing.  How it is paid to the FCs at AG Edwards or other firms I have no idea, but I think the best way to look at this is the compensation package brokers have at their firms.  AG contributes a significant amount into the FCs retirement plans.  Edwards brokers do not have to pay for their postage, telephone, and various office expenses they would occur at Jones.   AG brokers also do get to take trips, but it normally requires about 450k in production. When was the last time an Edwards broker had to pay for their own office supplies, toilet paper, and various other expenses Jones brokers incur in the day to day running of their business?  Also regardless of how profitable the firm is Edwards FCs always get a bonus based on their production, not the profitability of the firm.  For those of you familiar with Jones you know the firm must be showing a profit after GP payouts including revenue sharing before you get a bonus.  At Edwards as long as you reach certain production numbers you get a bonus and your retirement contribution is affected by the profitability of the firm.
So if revenue sharing is truly meant to be shared I would say at Edwards it is being done.  And it may be like this at other firms too including those who have gone private.  The only difference is those HUGE revenue sharing payments don't directly benefit the 277 (ROUGHLY) GPs before being shared with the brokers.  They get shared with the FCs and brokers.

dude's picture
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Joined: 2005-11-15

Lance, you're such a sweetie.  Makes me feel all warm and fuzzy to be the recipient of such intense admiration and love.  Merry Christmas.
Yours truly,
Dude the

troll's picture
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Joined: 2004-11-29

SonnyClips wrote:Your Lebowski, Lebowski.
Hey, that rug really pulled the room together 

dude's picture
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Joined: 2005-11-15

SonnyClips said:
Your Lebowski, Lebowski.
Reply:
Somebody clue me in here, as usual this  is clueless.  Thanks for saving myself from my own ignorance. 
Ooops, Looks like I'm missing recess, I gotta go get in line for tetherball!!!!!!  Maybe lance want's to play too?

Lance Legstrong's picture
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Joined: 2005-01-12

HO! HO! HO!
Its off to Switzerland I go!
See you boys and girls after the first of the year!  Y'all behave, that includes you Dude - don't be blowing doobies in the garage when your mom is serving up the Ham!
Merry Xmas!
Lance
 
 
 
 
 

troll's picture
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Joined: 2004-11-29

Lance Legstrong wrote:
 
  It sounds like AGE made a concious decision to pocket the cash from the revenue sharing (aka shelf space) practices and cut the brokers out.  At least EDJ the let the brokers play in the sand box at the beach with some of their cash!
That's an interesting way of saying  AGE doesn't pay or incent brokers in away to sell specific familes of funds. It's hard to image just how you twist that above board business practice into something bad and glorify an unnamed firm that paid brokers more to sell some funds (and sent them on trips because) and didn't mention that to the client. 

troll's picture
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Joined: 2004-11-29

dude wrote:
SonnyClips said:
Your Lebowski, Lebowski.
Reply:
Somebody clue me in here, as usual this  is clueless. 
Go rent a great Coen brothers (Raizing Arizona, O' Brother Where Art Thou) movie called "The Big Lebowski". You'll thank us later 

dude's picture
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Joined: 2005-11-15

Thanks for the clue in mike.
As for Lance, I still can't make heads or tails of his point.  Oh well time to go "blow" some doobies (whatever that means) and fatten up on the ham.  Peace.

dude's picture
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Joined: 2005-11-15

Sonny,
Like I said Lance is chasing ghosts.  I've sold proprietary funds before (even though I wasn't paid more) and understand the conflict of interest in a firm compensating a broker more for selling proprietary funds. 
The problem is if your only criteria for recommending a product is that it profits you more.  Then you can also get into issues like the VA RUMBLE ROYAL that has been going on for the better part of the month, where you have a product that has no breakpoints, pays 5.5% to 6% and offers extra goodies, which makes it very appealing to those who are less educated (the vast majority of the investing public) and therefore an easier sell and it becomes very easy (for us)to find reasons why it is in the clients best interests.
Ultimately there is no absolute answer to this question since everyone has differnt experiences and value systems and who are we to judge.  I can't say that BankFc or anyone else is sincerely screwing their clients by selling them a VA.  I believe that he (or she) is a decent, honest person. 
Sure I'm no a VA cheerleader, but as I've admitted before I have done some variable annuities and probably will sell one coming in January.
  As long as you are carefully assesing your motivations for recommending a higher paying investment and looking out for your client your doing the right thing.  My 2 cents.

troll's picture
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Joined: 2004-11-29

SonnyClips wrote:Maybe I am naive but I don't understand why it is inherently bad to make more money from some funds than others? I fully aware it maybe my ignorance but isn't it the disclosure that was the crime not the money. I'll tell you right now I am not looking at a certain companies funds because the trails don't kick in for a year. If all things are equal I will go somewhere else.
It used to be a practice some firms engaged in, the old DW for one. The preception is that it isn't right to drive a rep's decisions by paying them more to sell some funds than others, much less to do so without telling the client.

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