Arbitration and The Green Machine
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I agree with Broker24, too many FA’s at all firms don’t use this enough–sometimes an FA sees the difference between a couple of hundred$ on a NUA down the road and several thousand$ now in commission or fees…I would like to think that if you are knowledgeable on NUA’s you would explain them to your client and use them or some of them if it is in there best interest. I have used NUA at LPL too!
[quote=Spaceman Spiff]I too must have missed that particular brainwashing class. Which suprises me, since I used to teach those classes in my former Jones life.
I've had some clients move LARGE stock positions into their Jones accounts and we did have a discussion about owning too much of one thing. It had nothing to do with commissions, rather the risk you take owning having an overconcentration in one stock. Your old company or not, it's too much risk. My dad is a perfect example. He worked for a publicly traded company for 30+ years. Put every dime of his 401K money into company stock. Retired in 1999 with the stock at $55. The evil EDJ broker that I sent him to sold almost all of those shares totaling $566K. I'm POSITIVE she did it ONLY for the commissions. Evil woman! So, let's see what would have happened to dear ol' Dad if that evil woman wouldn't have sold it, instead just transferring in kind. Well, 12 months later that same stock was trading in the mid 20's. Hmmm...seems that evil woman who had been brainwashed by EDJ to sell those shares only for the commission, did my dad a huge favor. She bought him some horrible long bonds that are still paying him over 7%. She bought him some good funds (at NAV) that have done very well. She made sure he was balanced and ready for an eventual downturn in the market. All because EDJ brainwashed her into believing that there are "NO circumstances where someone should own company stock (regardless of percentage of net worth and tax considerations)". A slam back at you CIB, if you AREN'T having those discussions with your clients, instead just simply transferring in that money to a fee based account so you can "get paid on in-kind stock deposits to eliminate that conflict", then I think you are doing your clients a disservice and should revisit your EDJ roots so you can give your clients some good solid advice. [/quote] I spent well over 5 years with the machine, and stand behind what I say. I would not doubt this is another one of those regional cultural issues. I would venture to say that if you discussed NUA with 90-95% of my former region they would not understand it for a minute. I also sat with two EJ guys after I left and one of them was fawning about a new client with a bunch of stock coming in...the 20 year vet said "hopefully you'll get to sell and reinvest it." I do not doubt for a minute there are advisors out there doing the right thing, but from my experience there was a culture in my region of doing all we could to eliminate individual stock positions. (I think the RL had a lot to do with this culture looking back and reflecting on what you both had to say). I will end with this-There is a completely different tone to the conversation with my clients that are holding large individual stock positions that are paying me an advisory fee compared with those that held stocks at EJ. I can make a recommendation, yet leave the choice up to them with confidence that it won't effect my bottom line in the short term, and they can make their decision knowing the same thing .[quote=CIBforeveryone] I would not doubt this is another one of those regional cultural issues. I would venture to say that if you discussed NUA with 90-95% of my former region they would not understand it for a minute. I also sat with two EJ guys after I left and one of them was fawning about a new client with a bunch of stock coming in…the 20 year vet said “hopefully you’ll get to sell and reinvest it.”
I do not doubt for a minute there are advisors out there doing the right thing, but from my experience there was a culture in my region of doing all we could to eliminate individual stock positions. (I think the RL had a lot to do with this culture looking back and reflecting on what you both had to say). [/quote] I was just having this conversation the other day with a veteran. He was telling me that there is one particular region he knows of that he calls a "bunch of criminals". And this guy's a big producer, been around a while. He said there is a culture in the region that promotes commissions and production at any cost (to the client). It is just vastly different from my perspective (my region). But it was an eye-opener for me.[quote=Broker24]
I was just having this conversation the other day with a veteran. He was telling me that there is one particular region he knows of that he calls a "bunch of criminals". And this guy's a big producer, been around a while. He said there is a culture in the region that promotes commissions and production at any cost (to the client). It is just vastly different from my perspective (my region). But it was an eye-opener for me.[/quote] Ok, I've got SWAT, FINRA, FBI, & the Justice Department standing-by. If you'll PM me the region, I'll arrange for EDJ to hold a mandatory meeting for that region. Then we'll surround the place, go in and book'em all, just like the ending of the movie, "Boiler Room". Imagine the "Goodknight" opportunities...[quote=doberman] [quote=Broker24]
I was just having this conversation the other day with a veteran. He was telling me that there is one particular region he knows of that he calls a “bunch of criminals”. And this guy’s a big producer, been around a while. He said there is a culture in the region that promotes commissions and production at any cost (to the client). It is just vastly different from my perspective (my region). But it was an eye-opener for me.[/quote]
Ok, I’ve got SWAT, FINRA, FBI, & the Justice Department standing-by. If you’ll PM me the region, I’ll arrange for EDJ to hold a mandatory meeting for that region. Then we’ll surround the place, go in and book’em all, just like the ending of the movie, “Boiler Room”.
Imagine the “Goodknight” opportunities… [/quote]
From what I hear, some of those guys were already there, and the open offices spoken for (probably a GP’s kid )
Funny how an RIA has so little need for a form called “liquidate and transfer”. Jones FAs have TWO conflicts of interest here: one, bring in CASH only to avoid compliance (Jones never asks where it came from); two, bring in CASH to get paid. I know, I know: occasionally leave a few funds “in kind” so it looks good, but…
If I liquidate a fund before I transfer it, normally I do it in non qualified accounts. The only reason I do this is because I know that it will be easier for the client at tax time to have the company with all the cost basis info do the liquidation. The only reason I liquidate the fund at all is if there is another fund that I normally use, follow, and understand that has performed better. I understand that there are some folks out there that liquidate everything before brining it into Jones. But, I'll be that's not specific to Jones. I'll bet any firm that has a commission based model has that going on.
So RIAs don't have their favorite fund families? You leave every dollar exactly where you found it? You never move money from say Pioneer to DFA or to some other family that you know and trust? Then why do they pay you (BTW, drastically more using the fee based model over the long term than your typical A share buyer)?Maybe if Jones would transfer cost basis on accounts that leave, maybe they would get cost basis on accounts that come in!!!
Now that is a sore subject. What a pain in arse it is for both clients and us to try and get info out of Jones. They don't make it easy by design.
Client always come first was the General Partners montra. Or is it? Hey Spiff...Be careful about dissing the costs of fee based. Rumors are you'll have it at the regionals. Oh boy. Now you get to change your tune again because your company finally has seen the light. "Without a doubt, the best sales force in the world." Doug Hill, former head of the Green MachineMany firms transfer cost basis electronically, if the receiving firm has the technology to receive it. LPL does…I know that for a fact.
I understood completely that my comment would probably be met a response like yours. I'm looking forward to the fee based model. And I'll use it. But only after the client understand the options he has available to him. There has to be a benefit to for paying a fee. It IS cheaper to buy and hold A shares. You can't argue with that. Perhaps it was the implied I'm better than you are because I'm an RIA that I took offense to with newnew's comments.
I wish that Jones would figure out a way to transfer cost basis info from other firms. Maybe they're just too cheap to pay for the system to do it. Who knows. It would definitely make my life easier. And I wouldn't have to use all those liquidate and transfer forms!Spiff-just for some conversation, where do you see “flexibilty” fitting into client needs? I KNOW A shares are cheaper if you buy & hold for infinity (exaggeration.) But how many of your clients do you think will actually follow through with that scenario. Assets move all the time, each time for a better long term reason. Problem is, clients rarely follow through and “do nothing.”
Part of the value a client gets is that we do not need to liquidate their funds to get compensated, and in fact can make that decision/recommendation based on timing/circumstances/or other.
Your example is a great reason I became a believer on advisory fees. I am 100% convinced that there are cases where you may have been forced to liquidate the account for the reasons you mentioned (which are valid) immediately, while I can do the same process, but do so over the course of a year or two for tax reasons. If you amortize out the long term "cost" of the tax implications v. the benefit of delaying them, much of that extra .75%/year (minus the up-front commission) is offset. One client has a few of these situations over their relationship with me, in hard dollars alone much of that cost differential is offset. This is in addition to other benefits as I see it. The big question on the Jones advisory fee platform will be this...can the advisor move existing funds and stocks into it? If no, then Jones is eliminating many of the reasons it makes sense from day one. (And probably opening themselves up to further "revenue sharing" type legal consequences of limitations placed on their advisors/clients).CIB-
You can't be putting forth that the GP's might be interested in THEIR INCOME. Oh Spiff, can't you come up with a reasonable explanation as to why the GP's would want to put their precious revenue sharing scheme (I mean program, I know everyone does it) at risk. We are waiting for the brillance.This question has little to do with revenue sharing. You’re going to argue with me, I know. So be it.
As far as Jones letting other funds into the mix, my guess is no. Just my guess. It's been talked about as a great place for new dollars, like 401K rollovers, but not for existing assets. For the record, I agree that it would be a tremendous benefit to be able to bring any investments into the platform. I'm guessing that we'll get there eventually, but not upfront. I can only speak as to what I do in my office as far as liquidating funds. My preference would be to liquidate everything that is not something that I normally use and buy what I know. However, if in researching the funds it makes sense to hold, I do. I don't like it because I don't get paid on it, but I do it. It's what's right for the client and AUM for me. We talk about the tax issues involved with selling. If it makes sense and the client agrees we sell now. If it would be better to split it over a couple of years like you mentioned, we do that. horse - I have found A shares to be as flexible as my clients need them to be. My goal is to set up a quality portfolio upfront and make minor adjustments along the way. Sometimes it involves moving from one fund family to another, but only if there is a better opportunity in that space elsewhere and I can justify (to myself, the client, and FSD) that it makes sense. Right now, I'd love to move a chunk of money into Oppenheimer's Intl Bond fund, but for my American and Franklin families I have to weigh out if it makes sense to stick with their funds or move to Oppy. It's a discussion to have with the clients. Some will probably move, some will stick with American and Franklin's funds, even though their performance hasn't been as good as Oppy's. I do see the value in being able to call them and just tell them we're going to move some money from fund A to fund B. No cost above the annual fee. But for some of my clients it might not make sense.Spiffy-
I'll bite again.... Are you insinuating that revenue sharing has nothing to do with the new platform? You really are ready to be a GP. You think what you are saying is intelligent and thought out. Nothing could be further from reality. The only way that revenue sharing isn't part of the GP's conversation, is if they have figured out a way to make as much, or probably more somewhere else. So far, they haven't. But Weddle is the brightest mind they have, so if it is to happen it would be logical under his watch. I am sure Spiff will have a spin (have you considered politics or a stint on the GRASS roots task force ). Try engaging in truthful dialogue for a moment. I realize it may be hard to think for yourself but just go ahead and give it a try...My RL said her sources told her that no loads and ETFs w also. Finally. They finally realize that recurring revenue is MORE profitable–the new 5 year plan even tracks the projected (large) growth of recurring fee revenue. Better late than never; better late than launched poorly.
Ice - I fixed it. Fire away.
foot - I didn' t insinuate that at all. From an LP standpoint I hope revenue sharing IS a part of the decision. I'm sure we'll still get revenue sharing from the preferred funds, maybe even from some others that get included in the platform. But there will be some no load funds and ETFs in the mix that probably won't. When I said that they wouldn't let other funds in, I meant that if it wasn't a fund currently in the list of funds cleared for use in the platform, they probably won't let them transfer in. Like a fund that I can't hold in firm name just simply can't be moved into my office. I'm not trying to spin anything any more than you are. We're just trying to spin the opposite way. I agree with newnew that Jones has finally realized that recurring revenue is more profitable in the long run. The math is pretty simple. Take an office that has $30 mil in fee based accounts. If the gross is 1% that's a $300k producer. In a commission based environment that producer is probably $220K-250K at best. And there's a lot more stress on that FA to perform. An additional $10 mil in AUM changes the fee based producer's lifestyle. $10 mil in a commission based office changes that FA's AUM, but not his lifestyle.It’s a business. All revenue streams are considered. Personally, I think they will capture MORE revenue over time than they do with revenue sharing, since they are getting a larger ongoing fee, and they are getting it from more than just preferred funds (yes, some non-preferred funds are included, as well as some ETF’s). At the end of the day, it is a huge improvement for the advisors, clients, and firm. It also makes sense to further diversify their revenue stream (since it mostly comes from A-shares and some stock & bond commissions).