Arbitration and The Green Machine
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And to put the ‘Frosting’ on this- in order to be ‘offered’ DEBT to the Firm you must FIRST work extremely hard to build your business to a level of PROFITABILITY to the EQUITY OWNERS (GP’s) of the Firm- THEN VOLUNTEER More of your time- away from your family- in order to be given a LARGER DEBT to the EQUITY OWNERS of the firm.
Say what you want- but this is really how it is. In any other Publicly Traded Firm, you are GIVEN Stock and Stock Options.I don't think that is correct.
If I was offered $30,000 of LP as an FA I would have to come up with $7500 upfront. The rest is a loan made through US Bank, not the GPs. The interest earned goes to pay off the loan. Just like if you bought a house, but carried a mortgage, if you sold the house you would keep the difference between the current loan payoff and the value of the home. If I sell my LP, I keep what I have already paid off. I CAN sell it any any time. Once it is completely paid for (like mine will be in the next 3 months) I don't owe Jones anything. In fact, they owe me 7.5% interest guaranteed for the rest of my life. If Jones goes belly up, there would be no more LP to pay for. Therefore, the loan would go away. If the firm owed anyone anything that couldn't be covered by cash on hand, the GPs would have to come up with the rest. As an LP, I don't owe them anything and I don't have to dig into my own pocket should the firm need the extra cash. Sure, I lose my investment, but the same thing would have happened to me if BRK went bankrupt. When I die, my family can't keep the LP, but they do get a check for the money I have invested. If I leave Jones, I cash out my LP and take a check to the bank. If I retire from Jones, I get to keep the LP as long as I live. It is not a stock investment. Nobody has ever said it was. It's what we have. It works for us. The good thing about it is that if you don't work for Jones, you don't really need to concern yourself with it.[quote=footsoldier]
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.[/quote] What part screws you in the end? I guess I'm gonna feel really screwed in the next few months when I start gettting that check deposited into my Jones account every month. Man, I hate it when that happens. They are soooo screwing me.[quote=munytalks]And to put the ‘Frosting’ on this- in order to be ‘offered’ DEBT to the Firm you must FIRST work extremely hard to build your business to a level of PROFITABILITY to the EQUITY OWNERS (GP’s) of the Firm- THEN VOLUNTEER More of your time- away from your family- in order to be given a LARGER DEBT to the EQUITY OWNERS of the firm.
Say what you want- but this is really how it is. In any other Publicly Traded Firm, you are GIVEN Stock and Stock Options.[/quote] No, you aren't. Most clients that I've worked with have to work their fingers to the bone to get any really meaningful stock options. They travel, work long hours away from their families, work while they are at home, stress about everything, and are basically owned by the company. And they don't get to say no. If you don't say how high when management says jump, you're out of luck. They'll just go on to the next guy who is willing to play the game. The volunteerism at Jones typically gets worked into your normal schedule. Unless you are the Seg 1 support specialist who runs the monthly New FA meetings in the evenings. All the other meetings that I go to are during the day. You just learn to work your biz around it. You have to work really hard to get your biz up and running anyway. So, that's really a moot point. You've got this debt to the firm issue all wrong. If you don't know what you are talking about you should really stop.Mr. Spiff,
I think YOU are mis-informed. You were 'offered' $30,000 LP? You had to put up $7500- then took out a Bank Loan for the Balance? Okay- where do you get the idea that if EDJ goes belly up your loan to US Bank 'goes away'? Why would a Bank write off a personal loan for you? Would your mortgage company make your house payment 'go away' if your house burnt down?Edward Jones does not have the legal ability to dismiss any unpaid for L.P. offerings if the firm needed cash.
Do you know WHEN and WHY LP is offered? Do you know what FORMULA is used to determine HOW MUCH LP will be offered? Start asking G.P.'s- see if you can find ONE who will explain it to you. The fact is- LP is offered when there is a disparity between EQUITY Partnertship and DEBT Partnership. And the $700 Million in the General Partnership fund is EQUITY to the G.P.'s .RE: Stock and Stock Options- Did you ever have any former employees of Chevron/ Wal-mart/ ATT/ Boeing / Exxon / Home Depot / Pfiser ?
I had many. The greeters at Wal-Mart are given Stock. As for 'jumping' when managments say how high, were you describing your Regional Leader?I was reading info on Scientology last evening. Sounds very very much like the Jones and LP setup. Pay to play…odd isn’t it. Discredit the ones who leave…lie lie lie is preached…a cult…Muny…Your arguing with a sucked in drone…Weddle could call him and say…“Spiffy, I’m sorry, but we’ve been screwing you for years”…and Spiff…would just shrug it off and jump on the phone with his 20 year HSBC subprime bomb…la la la la …I’m not listening…lalala
[quote=munytalks]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. [/quote] All true (except that you have it turned around - it is really debt to the limited partner - it's like buying a high-yielding bond - Jones pays YOU back upon death, termination, etc.). But I will take debt that guarantees 7.5%, which has averaged 25.5% over the past 30 years, for which I buy on 75% margin. It's WORST return over the past 30 years is like 15% (in 1988). Even in 2002 it returned 15.8%. Again, it's not perfect, but it's certainly nothing to turn your nose up at. I have never heard of one Jones advisor (other than the real tenured veterans) claim to stay or work for the firm simply because of the LP. Personally, I don't even consider it part of my "compensation" package, as they like to market it. I consider it an investment (that would be if, and when, I get some). Now if you stay long enough and get enough of it, it's a pretty sweet pension. If you look at the IRR on the 25% you put down, it's a real sweet deal for retirement. I think some people over-emphasize how much some of us really value LP with Jones. Besides, I'd rather take the higher payout of being indy than the LP ownership any day - that is if there were not other factors.[quote=munytalks]
Mr. Spiff,
I think YOU are mis-informed. You were 'offered' $30,000 LP? You had to put up $7500- then took out a Bank Loan for the Balance? Okay- where do you get the idea that if EDJ goes belly up your loan to US Bank 'goes away'? Why would a Bank write off a personal loan for you? Would your mortgage company make your house payment 'go away' if your house burnt down?Edward Jones does not have the legal ability to dismiss any unpaid for L.P. offerings if the firm needed cash.
Do you know WHEN and WHY LP is offered? Do you know what FORMULA is used to determine HOW MUCH LP will be offered? Start asking G.P.'s- see if you can find ONE who will explain it to you. The fact is- LP is offered when there is a disparity between EQUITY Partnertship and DEBT Partnership. And the $700 Million in the General Partnership fund is EQUITY to the G.P.'s . [/quote] Muny, Jones would not "dismiss" the debt. The LP would be returned to you, and you would use the proceeds to pay off the loan. It's like when you sell your house. The buyer pays you, and you pay off the mortgage. And if Jones goes belly-up, the GP's are on the hook for the LP balances (not the "loan" balance). Honestly guys, I don't think any of us are claiming that LP is anything more than it is. It's a very, very high yielding bond that we were able to buy on margin.spears - welcome back. Nice to hear from you again. Isn't any investment pay to play? Wouldn't I have to pay for $30,000 of BRK in order to play along with them? It's an investment. As long as it keeps paying me, I guess I will just keep shrugging it off. muny - upon further review, you bring up a good point. I would assume if Jones went bankrupt that my LP would just dissolve. Perhaps US Bank wouldn't like that. I'll have to do some further digging to see what would happen to my loan if Jones went out of biz. Not that I think it's going to happen. I would imagine they would sell the company before they went bankrupt. At which point, I'd get a payout on whatever the sales price was. Funny, the only people I've ever heard of that have bad mouthed the LP are the people who don't have any. Then it's usually sour grapes cause they wanted some and didn't get any.I was reading info on Scientology last evening. Sounds very very much like the Jones and LP setup. Pay to play…odd isn’t it. Discredit the ones who leave…lie lie lie is preached…a cult…Muny…Your arguing with a sucked in drone…Weddle could call him and say…“Spiffy, I’m sorry, but we’ve been screwing you for years”…and Spiff…would just shrug it off and jump on the phone with his 20 year HSBC subprime bomb…la la la la …I’m not listening…lalala
I will not “bad mouth” the LP. No I never stayed around long enough to get any. One of the points though being made in this argument is that LP is NOT as great as Jones leads people to believe. IMO it is obviously something you want when you have the chance, but is setup to more to keep people in love/tied to Jones. It is a carrot to keep you around/drinking the koolaid.
And don’t forget the strategy of diversification. Make sure you don’t invest more than 10% of your assets in LP. The reason you think LP is so fine is because you won’t ever get GP, even as good of soldier as you are to the firm.
Spiff- I have said it before, you seem too intelligent NOT to think for yourself and outside the Jones speak. The income you receive is good if you didn't have to pay for it with blood sweat and your hard earned 36% earnings. You will see the light eventually. I never wanted and was offered LP. I didn't want any debt, in fact I have been on a plan to pay off all debts in 10 years (including my mortgage). At Jones, I went into personal savings way too often and I was a Seg 4 broker living on the west coast. It never made any sense for me to take on more debt to buy a bond. How often have you advised a client to leverage their assets to buy a bond AAA or high yield (wouldn't compliance be all over you)?Spiff - it’s a business that is organized as a partnership. Creditors get paid first, General partners next. Limited partners last. The loan is a loan is a loan. You took out the loan because you didn’t have the money to buy it outright.
It’s essentially a preferred stock(it’s a partnership interest - it’s nonvoting equity that pays a high dividend) that is guaranteed to pay 7.5% with a non-qualified profit sharing component. You get paid more if the firm makes more profits.
Now, can we all stop being (*&@^
[quote=Philo Kvetch]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]
I don’t know where you and Spiff are getting your numbers, but they are, in fact, incorrect. I do know what I’ve paid each time I bought BRK and it bears no resemblance to what you’ve reported. Sorry guys, but you’ve been fed some bad info.
As a Jones person who worked for a S & P 500 company before Jones, I can tell you that I recieved stock options and I didn’t pay a dime for them. The idea of building a business to profitability and having to volunteer to help others without compensation all in the pursuit fo LP which you have to pay for yourself is an incredible concept… To each his own…
[quote=Ashland]Spiff - it’s a business that is organized as a partnership. Creditors get paid first, General partners next. Limited partners last. The loan is a loan is a loan. You took out the loan because you didn’t have the money to buy it outright.
[/quote]
You are right, you didn't pay for the OPTION to buy the stock, but had you chosen to excerise your option, you would have PAID for them at a predetermined price set by your company. If the company goes belly-up, what exactly are your options worth? Likewise, at Jones, some are given the optionto buy into LP. That option is free. However, excerising said option will cost you money at an amount set by Jones (or any other partnership).As a Jones person who worked for a S & P 500 company before Jones, I can tell you that I recieved stock options and I didn’t pay a dime for them.
[quote=chaz] [quote=Ashland]Spiff - it’s a business that is organized as a partnership. Creditors get paid first, General partners next. Limited partners last. The loan is a loan is a loan. You took out the loan because you didn’t have the money to buy it outright. [/quote]
General Partners are paid last in a liquidation. In order: Taxes, Secured Creditors, General Creditors, Limited Partners, General Partners.[/quote]
chaz, you’re correct…
[quote=Broker24] [quote=Philo Kvetch]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]
I don’t know where you and Spiff are getting your numbers, but they are, in fact, incorrect. I do know what I’ve paid each time I bought BRK and it bears no resemblance to what you’ve reported. Sorry guys, but you’ve been fed some bad info.[/quote]
You’re correct. You did not buy EXACTLY 10 or 20 years ago. You likely bought when the stock was down, so you have experienced a better rate of return than the 10 or 20 year averages. Hence my statement “Depending on your actual holding period, it could be more or less”. But those actual 10 and 20 year numbers are based on two different sources. If I am wrong, I certainly welcome the correct numbers (as opposed to “they are, in fact, incorrect.”).