Arbitration and The Green Machine
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[quote=Broker24]
I agree with all you guys. Again, I am just too lazy or comfortable to move yet. I think I am also not ready to be completely on my own yet (until I am at the point where I could build a team). I have a great group of guys in my area, and we all get along great, help each other, etc. I would not enjoy complete solitude as a solo.
I actually find it sort of humorous that all the EDJ guys try to convinve the Indy’s that life is better than it is at Jones, and the Indy guys try to convince all the EDJ guys to leave for Indy.
Fact is, both channels have merit. It also depends what stage you are at. But I still find it funny the way everyone swings their %^#'s around about it.[/quote]
Quite right, B24. I’ve said it before, and I’ll say it again: If you’re happy where you are, then I’m happy for you.
[quote=Philo Kvetch]
Quite right, B24. I’ve said it before, and I’ll say it again: If you’re happy where you are, then I’m happy for you. [/quote]
Really? Because what I read was:
[quote=Philo Kvetch] And that’s why real brokers are so bemused by it all.[/quote]
Were you also for the war before you were against it?
Not to rain on your parade my diminutive green friend, but the statements are not contradictory.
I can, for example, be amused watching a cat play with a string and be happy for the animal's pleasure. That does not, however, make the cat my equal.I can, for example, be amused watching a cat play with a string and be happy for the animal’s pleasure. That does not, however, make the cat my equal.
[quote=Philo Kvetch] Not to rain on your parade my diminutive green friend, but the statements are not contradictory.
I can, for example, be amused watching a cat play with a string and be happy for the animal’s pleasure. That does not, however, make the cat my equal.[/quote]
Hey, what are you trying to say??
[quote=Broker24] [quote=Philo Kvetch] Not to rain on your parade my diminutive green friend, but the statements are not contradictory.
I can, for example, be amused watching a cat play with a string and be happy for the animal’s pleasure. That does not, however, make the cat my equal.[/quote]
Hey, what are you trying to say?? [/quote]
He’s saying that the string is his equal and he hopes to be a cat someday.
He is saying the string is being screwed by the GPs and the cat doesn’t do enough fee-base business.
Doubleb: to elaborate, I made the move about 3 years ago. Since that time all new business has been fee-based except for the occasional VA ticket. I've been converting old EDJ clients into fee-based where appropriate but it is not always. So my book is about 50% fee-based advisory accounts, 25% C-shares and VA's, and the rest in old A-shares (primarily american funds buy-and-hold portfolios). But it is wonderful to have the choice and recommend what makes the most sense for the client and to be able to use all the great no-load funds out there. I don't have any FA's under me yet but only because I have not found the right guy. I'm not really actively looking yet either but plan to this year.
He is saying the string is being screwed by the GPs and the cat doesn’t do enough fee-base business.
Philo, I hate to be the one to rain on your parade, but just running a quick hypo on your BRK B for the last 10 years tells me that you have averaged about 10.5%, where the Jones LP has averaged 22.5%. Let's say we both started with $10,000 in our investments. If I would have just simply taken the interest and stuck it in my sock drawer (no additional interest) I would have $32,500 today. You'd have $27,000. That's without earning a single penny in additional interest on that LP return. I'm GUARANTEED 7.5% every year. Is Warren going to do that for you? Ted Jones did it for us.[quote=Incredible Hulk] “Real Brokers?” What is it that makes you a real broker but not I??
Is it the catchy name Philo Kvetch?
As for the LP - let’s take a $10M position purchased for $2500, the rest leveraged. That $10M LP paid out $2200 before interest this year. That’s rougly a 70% return after interest. Explain how that’s bad?
Hmmm… I’ve been sucked in again.
I’m going back into hiding.[/quote]
Since you’re counting outside investments in your compensation, my Berkshire Hathaway holdings have consistently blown your LP out of the water…and the only limit on how much I can own is how much I can afford.
Philo, I checked BRKA and B. Both of the numbers Spiff listed are correct. On the other hand, this is exactly 10 years. Depending on your actual holding period, it could be more or less. For example, a 20 year holding period on BRKA would have returned 21%, which is almost as good as EDJ partnership (not reinvesting dividends). And you may have used 50% margin, which improves the return. But then we would have used 75% margin, so, moot point. And with our margin, our interest checks pay back the loans. We don't have to sell shares or use cash to pay it back. Bottom line, EDJ LP is a pretty good deal if you can get enough to matter. Anyone that can get a guaranteed 7.5% return and use 75% margin to buy in has a pretty sweet deal. The only problem you run into with LP is the tax affect. This is probably what you are referring to. Since it is ordinary income, it can really chew through returns. That is my biggest beef with LP. Then again, most guys (and gals ) are using this as a retirement annuity, so they just have to deal with making 20%+ in taxable income. But if you are in the 38% tax bracket (combined), that's really only like 12.5% after taxes. So I am guessing that the tax issue is where your argument comes in? Valid point.Spiff;
1) I’m not talking about BRK.B
2) I suggest you re-check your numbers.
Philo, I checked BRKA and B. Both of the numbers Spiff listed are correct. On the other hand, this is exactly 10 years. Depending on your actual holding period, it could be more or less. For example, a 20 year holding period on BRKA would have returned 21%, which is almost as good as EDJ partnership (not reinvesting dividends). And you may have used 50% margin, which improves the return. But then we would have used 75% margin, so, moot point. And with our margin, our interest checks pay back the loans. We don't have to sell shares or use cash to pay it back. Bottom line, EDJ LP is a pretty good deal if you can get enough to matter. Anyone that can get a guaranteed 7.5% return and use 75% margin to buy in has a pretty sweet deal. The only problem you run into with LP is the tax affect. This is probably what you are referring to. Since it is ordinary income, it can really chew through returns. That is my biggest beef with LP. Then again, most guys (and gals ) are using this as a retirement annuity, so they just have to deal with making 20%+ in taxable income. But if you are in the 38% tax bracket (combined), that's really only like 12.5% after taxes. So I am guessing that the tax issue is where your argument comes in? Valid point.[/quote] ".......if you can get enough to matter." Here in lies the problem.... most jonesers fight over the peanuts and are lucky if they even get any LP to begin with. I have a friend at jones that always says how great that LP is and all, but the problem is that his Seg 4 arse has exactly zero, squat, zilch, notta of it. He has been with jones for over 7 years and in a leadership position in the region for about 5 years. for 90% of the Jones reps, LP is nothing more than a carrot and stick.... wanna play??.... anybody want to lead the saturday morning newbie meetings??.... Their is LP in it for you... maybe... at some point... just a little more "volunteer" work fellas.... it is right here..... come and get it!!! Anyway, you guys can have fun with that.[quote=Philo Kvetch]Spiff;
1) I’m not talking about BRK.B
2) I suggest you re-check your numbers.
You’ve got a valid point. The difference between a lot of company stock plans and Jones LP is that most company stock is available whenever you want it. Not so with the LP. Your friend is caught in that awkward bubble where he probably was brand new when the first round of LP came out about 6 years ago. Not profitable enough when it came out this last time. But he should get it when it comes out again in a couple of years. A buddy of mine similar to your friend was passed over a few years ago because of profitability, but got a good offer the last time around. He doesn’t do much in the way of volunteering, but they offered him $35,000 worth mostly on his profitability. Once you get offerings in the field they are typically substantial. It’s not a perfect investment, but you can’t argue that it’s not a good one.
FOOD FOR THOUGHT:
If I own $30,000 worth of BRK B or any other stock for that matter, I have paid for it and can sell any day the market is open. If I die, my heirs can keep it or sell with a step-up in cost basis. If I am 'offered' $30,000 worth of EDJ LP- it is a DEBT. I OWE Edward Jones $30,000. I cannot sell it anytime I want- nor can my heirs keep it or sell it. AND think about this: If I am 'offered' $30,000 worth of LP and Jones goes belly up- I will still have to PAY the $30,000 to the General Partners- General Partners have EQUITY Partnership in the firm. Limited Partnership is a DEBT TO THE FIRM. You DON'T OWN IT. I would still OWE the General Partners AND I wouldn't have a job anymore.Munytalks tells the real story of LP. LP is intended to make you FEEL special. And screw you in the end. The essence of the Jones culture.
It really is a shell game. And LP is the biggest shell in the Jones system. Spiff, noggin, B24 and any other Jones rep on this forum should really think long and hard before they try to defend management. Maybe all firms are like this, but I doubt it.