CLASSIC Sales Literature...

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munytalks's picture
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I just picked up today's mail- in it is a new American Funds Brochure and Prospectus called the "ANNE RODDA STORY".
As a badge wearing, card carrying member of the Green Team for Jones, this always made great sense to me. Story of a woman who invested $5026 in 1957 and made withdrawls throughout her lifetime.
But today it's like I'm seeing this for the first time: inside the literature is a box giving the total return for the American Mutual fund versus it's benchmark the S & P 500. Results?
AMF  11.95%     S&P  14.31%
So how do you explain to your client across the desk looking at this thinking "WHY WOULD I INVEST MY MONEY IN A FUND THAT UNDERPERFORMS THE BENCHMARK CONSISTENTLY SINCE 1957?"
Simple - the brochure explains the meaning :
"As shown here, over its lifetime, American Mutual Fund has been less volatile than its primary benchmark, the S&P 500."
Outstanding. I want to sell my client a fund that underperforms the benchmark since inception but explain it as being "less volatile". Oh, and then there's the upfront load.
Don't get me wrong- there are some GREAT American Funds- but come on- calling an underperformer "less volatile"?

jonesescapee's picture
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Actually what really sells the client is the JD power and associates poster in the office along with smell of Chinese food.
Real tomato ketchup Clark

Devoted SA's picture
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We must be on the same AF mailing list. Got a copy of that one in the mail too. I wanted to know why Anne spent $1980 on patio furniture in 1977. Did they adjust the brochure backwards for inflation? $1980 for patio furniture in 77 has got to be alot of money.

MBAassist's picture
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jonesescapee wrote:
Actually what really sells the client is the JD power and associates poster in the office along with smell of Chinese food.
Real tomato ketchup Clark

Actually that window cling-that is VOLUNTARY-adds merit to serving the individual investor that others neglect or reject unless they are $1M or more, what a joke!

unsunghero's picture
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MBAassist wrote:jonesescapee wrote:
Actually what really sells the client is the JD power and associates poster in the office along with smell of Chinese food.
Real tomato ketchup Clark

Actually that window cling-that is VOLUNTARY-adds merit to serving the individual investor that others neglect or reject unless they are $1M or more, what a joke!

Nice try Incredble No "i" you are as transparent as the front door on stripmall Jones office. 

Indyone's picture
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munytalks wrote:...But today it's like I'm seeing this for the first time: inside the literature is a box giving the total return for the American Mutual fund versus it's benchmark the S & P 500. Results?
AMF  11.95%     S&P  14.31%
So how do you explain to your client across the desk looking at this thinking "WHY WOULD I INVEST MY MONEY IN A FUND THAT UNDERPERFORMS THE BENCHMARK CONSISTENTLY SINCE 1957?"
Simple - the brochure explains the meaning :
"As shown here, over its lifetime, American Mutual Fund has been less volatile than its primary benchmark, the S&P 500."
Outstanding. I want to sell my client a fund that underperforms the benchmark since inception but explain it as being "less volatile". Oh, and then there's the upfront load.
I'm not defending his fund...I've never sold it, but the numbers you're quoting are the standard deviation, NOT annual return.  Annual return according to the flyer in question is 12.3% vs. 11.9% for the S&P 500 for the period in question.  It's hardly a world-beater, but they do have a point about returning more with less volatility...

Indyone's picture
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MBAassist wrote:jonesescapee wrote:
Actually what really sells the client is the JD power and associates poster in the office along with smell of Chinese food.
Real tomato ketchup Clark

Actually that window cling-that is VOLUNTARY-adds merit to serving the individual investor that others neglect or reject unless they are $1M or more, what a joke!
Yes, you are...get a grip...

The Answer's picture
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Indyone,
So what you are saying is that the American Mutual Fund earned a better rate of return than the S&P 500 with 16.5% less risk as measured by standard deviation?
I was under the impression that most American Fds have under performed the S&P.
P.S. Muny, my 5th grader has better reading comprehension than you.

Indyone's picture
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The Answer wrote:Indyone,
So what you are saying is that the American Mutual Fund earned a better rate of return than the S&P 500 with 16.5% less risk as measured by standard deviation?
I was under the impression that most American Fds have under performed the S&P.
That's what the flyer says.  There are several American Funds that clobber the S&P index.  It really hasn't been the case that they can't perform.  The biggest knocks on American Funds is that (1) they've gotten very big and there is a question as to whether they can still perform at a high level given this bloat, (2) They are not very style pure.  As JoeDaLPLBroker said recently, their growth fund was accumulating a lot of international names as holdings, and (3) They often don't show much appreciation when a broker gives them significant business...they are notoriously cheap.

munytalks's picture
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Indyone wrote:munytalks wrote:...But today it's like I'm seeing this for the first time: inside the literature is a box giving the total return for the American Mutual fund versus it's benchmark the S & P 500. Results?
AMF  11.95%     S&P  14.31%
So how do you explain to your client across the desk looking at this thinking "WHY WOULD I INVEST MY MONEY IN A FUND THAT UNDERPERFORMS THE BENCHMARK CONSISTENTLY SINCE 1957?"
Simple - the brochure explains the meaning :
"As shown here, over its lifetime, American Mutual Fund has been less volatile than its primary benchmark, the S&P 500."
Outstanding. I want to sell my client a fund that underperforms the benchmark since inception but explain it as being "less volatile". Oh, and then there's the upfront load.
I'm not defending his fund...I've never sold it, but the numbers you're quoting are the standard deviation, NOT annual return.  Annual return according to the flyer in question is 12.3% vs. 11.9% for the S&P 500 for the period in question.  It's hardly a world-beater, but they do have a point about returning more with less volatility...

 
What I am wondering is WHY are they spending money marketing this fund? No matter where I check it seems to be the worst of American Funds- so why all the ink?  I just rechecked the brochure and you are correct but when I also look at the piece called "What Makes AmericanFunds Different" it give the return as follows:
1 yr 4.37  5 yr. 5.65  10 yr. 11.27   so still not Great.
and I DO like many American Funds. Like why didn't they make nice marketing pieces for Capital Income Builder if they want to market a less volatile fund? I was just saying it didn't make any sense.

munytalks's picture
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The Answer wrote:
Indyone,
So what you are saying is that the American Mutual Fund earned a better rate of return than the S&P 500 with 16.5% less risk as measured by standard deviation?
I was under the impression that most American Fds have under performed the S&P.
P.S. Muny, my 5th grader has better reading comprehension than you.

 
You must be very proud! Maybe I can borrow him next time I go through my mail sorting out all this crap we get.
But I still don't get why American spends so much money marketing a THIS fund....

exdrone's picture
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Muny,
They are marketing this one because it apparently isn't selling itself, and their wholesalers don't exactly do anything.  Besides this is typical of their style to promote a fund that is out of favor. 

Indyone's picture
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munytalks wrote:Indyone wrote:munytalks wrote:...But today it's like I'm seeing this for the first time: inside the literature is a box giving the total return for the American Mutual fund versus it's benchmark the S & P 500. Results?
AMF  11.95%     S&P  14.31%
So how do you explain to your client across the desk looking at this thinking "WHY WOULD I INVEST MY MONEY IN A FUND THAT UNDERPERFORMS THE BENCHMARK CONSISTENTLY SINCE 1957?"
Simple - the brochure explains the meaning :
"As shown here, over its lifetime, American Mutual Fund has been less volatile than its primary benchmark, the S&P 500."
Outstanding. I want to sell my client a fund that underperforms the benchmark since inception but explain it as being "less volatile". Oh, and then there's the upfront load.
I'm not defending his fund...I've never sold it, but the numbers you're quoting are the standard deviation, NOT annual return.  Annual return according to the flyer in question is 12.3% vs. 11.9% for the S&P 500 for the period in question.  It's hardly a world-beater, but they do have a point about returning more with less volatility...

 
What I am wondering is WHY are they spending money marketing this fund? No matter where I check it seems to be the worst of American Funds- so why all the ink?  I just rechecked the brochure and you are correct but when I also look at the piece called "What Makes AmericanFunds Different" it give the return as follows:
1 yr 4.37  5 yr. 5.65  10 yr. 11.27   so still not Great.
and I DO like many American Funds. Like why didn't they make nice marketing pieces for Capital Income Builder if they want to market a less volatile fund? I was just saying it didn't make any sense.
No doubt this isn't one of their better efforts, although it is the exact fund sold by the local "star" EDJ broker to my father back in the 80's when I told him he needed to fund an IRA.  I'll also agree that it seems to be AmFunds style to promote funds that are out of favor and not selling well by emphasizing the positives, and downplaying the fact that this has been a lackluster fund at best.  They probably aren't promoting CIB and growth fund because the inflows there are sufficient to satisfy the machine.
I find myself doing less and less American Funds because of these and other concerns, not to mention the fact that they do a lousy job of supporting the reps that are feeding them.  Much of what I used to feed AmFunds is now going to Franklin and ING VA's...there's plenty of comparable alternatives in those shops, and they've agreed to write checks for my customer appreciation events.  While I understand that AmFunds probably doesn't miss me, it just feels therapeutic to stick it to them in some small way...

Teleman's picture
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Amen Indyone!
As far as A.F. , they promote the flavor (fund) of the year. I trust all the Jones  boys will be selling this fund  as they all seem to march to the same drum.
A.F. has no secrets when it comes to support. You get it if you produce several million a year. If you don't sell a million at least, you really don't exist. Yes, they've done a good job and yes, they have been very, very impressive when it comes to their performance however, I was at Jones from '98 to '04 and I remember not being able to give away A.F.'s  in '98 & '99 because all the other houses were so hot. I believe time will bring many of the other fund families back to the norm. I would hate to put serious $$'s at A.F. now. I believe fund families that have different investment philosophies will catch A.F.'s  sacred numbers that they have posted. Time will tell.
As far as comparing numbers, I believe it's really only brokers that cause all this fuss. If you have a relationship with your clients, they will follow your advise and council always. Especially if you do it with conviction. If you believe in whatever fund family, stock, uit  or money manager that you represent, then they will too. We are the only ones that worry about the numbers! They just wanna know that you care. If they do watch the numbers then you probably really don't want them as clients. Thats just my thoughts on this

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Indyone wrote:
I find myself doing less and less American Funds because of these and other concerns, not to mention the fact that they do a lousy job of supporting the reps that are feeding them. 
Why would you be doing, "less and less" instead of absolutely zero?

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NASD Newbie wrote:
Indyone wrote:
I find myself doing less and less American Funds because of these and other concerns, not to mention the fact that they do a lousy job of supporting the reps that are feeding them. 
Why would you be doing, "less and less" instead of absolutely zero?

Breakpoints?  
I thought you said to find a fund and stick with it through thick and thin 

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babbling looney wrote:
Breakpoints?  
I thought you said to find a fund and stick with it through thick and thin 

If you're getting breakpoints in Fund A you should be able to move it to Fund B and qualify for a breakpoint there too.
I understand the tax ramifications and the fact that your client will be incurring a second sales charge--but that could be a small price to pay if there are storm clouds on the horizon.

Butkus's picture
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Actually the 10, 15 and 20 year beta's on the fund are 0.59, 0.62 and 0.63 respectively. A recent American Funds "Investors" magazine has an article on active vs passive mgmt, and a hypothetiical illustration compares the American Mutual Fund with the S&P 500 from 1970 to 2000. A $100K in the index grew to $4.8M and in their fund to less than $4.4M. But if the investor started with a 5% distribution, increased annually 5% for inflation, then the ending amounts were $1.2M for their fund and $550K for the index. Through 2005 the ending amounts were $1.7 for their fund and $350K for the index. So volatility was crucially important. As they expressed, the person was eating their seed corn in difficult times.
I am very comfortable using this fund for retirees and showing this illustration. 

bankrep1's picture
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Butkus wrote:
Actually the 10, 15 and 20 year beta's on the fund are 0.59, 0.62 and 0.63 respectively. A recent American Funds "Investors" magazine has an article on active vs passive mgmt, and a hypothetiical illustration compares the American Mutual Fund with the S&P 500 from 1970 to 2000. A $100K in the index grew to $4.8M and in their fund to less than $4.4M. But if the investor started with a 5% distribution, increased annually 5% for inflation, then the ending amounts were $1.2M for their fund and $550K for the index. Through 2005 the ending amounts were $1.7 for their fund and $350K for the index. So volatility was crucially important. As they expressed, the person was eating their seed corn in difficult times.
I am very comfortable using this fund for retirees and showing this illustration. 

Someone that actually understands total return is always the most important factor  I haven't seen many like you here.

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NASD Newbie wrote:
Indyone wrote:
I find myself doing less and less American Funds because of these and other concerns, not to mention the fact that they do a lousy job of supporting the reps that are feeding them. 
Why would you be doing, "less and less" instead of absolutely zero?
Because, like them or not, there are still areas where they compete very well.  I just find myself looking much more diligently for replacements in areas where they don't appear nearly invincible

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Butkus wrote:
Actually the 10, 15 and 20 year beta's on the fund are 0.59, 0.62 and 0.63 respectively. A recent American Funds "Investors" magazine has an article on active vs passive mgmt, and a hypothetiical illustration compares the American Mutual Fund with the S&P 500 from 1970 to 2000. A $100K in the index grew to $4.8M and in their fund to less than $4.4M. But if the investor started with a 5% distribution, increased annually 5% for inflation, then the ending amounts were $1.2M for their fund and $550K for the index. Through 2005 the ending amounts were $1.7 for their fund and $350K for the index. So volatility was crucially important. As they expressed, the person was eating their seed corn in difficult times.
I am very comfortable using this fund for retirees and showing this illustration. 

What would the figures look like for a fund that had betas in excess of 1.00?

Indyone's picture
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Butkus wrote:Actually the 10, 15 and 20 year beta's on the fund are 0.59, 0.62 and 0.63 respectively. A recent American Funds "Investors" magazine has an article on active vs passive mgmt, and a hypothetiical illustration compares the American Mutual Fund with the S&P 500 from 1970 to 2000. A $100K in the index grew to $4.8M and in their fund to less than $4.4M. But if the investor started with a 5% distribution, increased annually 5% for inflation, then the ending amounts were $1.2M for their fund and $550K for the index. Through 2005 the ending amounts were $1.7 for their fund and $350K for the index. So volatility was crucially important. As they expressed, the person was eating their seed corn in difficult times.
I am very comfortable using this fund for retirees and showing this illustration.
I had a competitor (guess where he was from?!!) use AmFunds with a prospect nearing retirement.  I profiled the prospect and realized how low her risk tolerance was, and then closed the deal with a VA with income and principal guarantees.  She could not have cared less when he insisted that his hypo showed her able to take more in cumulative withdrawals...she just kept asking (with my insistence), "but is it guaranteed?"  Kind of like when his clients try to find out what the final maturity of a high yielding bond and he keeps repeating the call date back to them.
...just understand that this fund presentation doesn't always work, particularly if you have a competitor showing some other alternatives.

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Congrats on closing the deal, indyone!
And it's probably a blessing in disguise for the other broker. Had he closed the deal instead, he may have ended up in arbitration with your client.
I can hear the pitch put forth by the other broker now: "You want guarantees for your money? I guarantee you'll be happy with this fund! I guarantee I'll provide you with the best service! I guarantee you'll have the best minds on Wall Street working hard to provide you with a more secure future! I guarantee I'll send you a postcard from Tahiti, when I win the trip from selling you this fund! ...Oh, uhhhhh, did I show you this neat graph?  ...Ya know, you remind me of my mother."

The Judge's picture
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Tough to see an arbitration brewing as most American Funds are trading at/near their all-time highs.  Compare that to the annuities with their high annual fees and you can bet the ranch that almost any of their funds has absolutely trounced the VA.
Not to say that IndyOne made a poor decision; he sold the client what she wanted, and peace of mind (IMO) is more important than performance.

The Truth's picture
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The point is, The Judge, that all Jones brokers pitch the same thing to all
clients. American Funds is the answer to all.   Regardless what the situation
and what other funds you might own. Go to Jones and it is a given your
current funds will be dumped and put into American Funds.

Client needed more protection and Indyone presented another alternative.
Something Jones brokers are not allowed to do. Especially if it is non-
revenue sharing.

The Judge's picture
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Truth- I knew what the point was. Perhaps I should've made mention to the liquidate and transfer form.
Why are so many people on this board "obsessed" with EDJ? There must be a reason.

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The Judge wrote:
Truth- I knew what the point was. Perhaps I should've made mention to the liquidate and transfer form.
Why are so many people on this board "obsessed" with EDJ? There must be a reason. Because they are the epitome of "jerkdom."

munytalks's picture
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The Judge wrote:
Tough to see an arbitration brewing as most American Funds are trading at/near their all-time highs.  Compare that to the annuities with their high annual fees and you can bet the ranch that almost any of their funds has absolutely trounced the VA.
Not to say that IndyOne made a poor decision; he sold the client what she wanted, and peace of mind (IMO) is more important than performance.

It is my understanding from having studied and passed the Registered Principal's exam that Indyone did EXACTLY what would keep him OUT of arbitration. He advised the client of what investment product SHE would be most suited for.
Thinking that performance is all that matters is what will get an advisor in arbitration quicker than anything.  It's not what the Advisor is comfortable with, it is what the CLIENT is comfortable with. And of course, documenting everything.

noggin's picture
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The Truth wrote:The point is, The Judge, that all Jones brokers pitch the same thing to all clients. American Funds is the answer to all.   Regardless what the situation and what other funds you might own. Go to Jones and it is a given your current funds will be dumped and put into American Funds. Client needed more protection and Indyone presented another alternative. Something Jones brokers are not allowed to do. Especially if it is non- revenue sharing.
Wrong!!  Next contestant please!

Butkus's picture
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I think it is worth making the observation that if a Jones broker had started this thread with the confusion of annual return for standard deviation, there would have been quite a few comments about the poor understanding of Jones brokers. Just another example of how this forum is heavily biased against the firm.
If people really want to know more about Jones they should visit some offices and meet brokers.

The Judge's picture
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Munytalks- You are so wrong it's beyond belief.  Please.
A client can take you to arbitration for whatever reason they choose. All they need is an attorney and a postage stamp.  It doesn't matter what the advisor or the client are comfortable with.  Still, if the performance is there (i.e. makes money and does decent vs. market conditions) you have a much less chance of being taken to arbitration.  I would bet that 95% of cases are due to lost funds/poor performance/proprietary products/churning/etc.
Now...let the attorney stew over the annual management fees/costs of the annuitie, as well as the significant CDSC, not to mention the likely alternatives available, and you can have a problem. And heaven forbid this is done in an IRA account.
I do agree with you that documenting everything is important.  Good point- but (again) a client can sue you for any reason they choose, even if it's totally not valid.
 

Revealer's picture
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Butkus wrote:
I think it is worth making the observation that if a Jones broker had started this thread with the confusion of annual return for standard deviation, there would have been quite a few comments about the poor understanding of Jones brokers. Just another example of how this forum is heavily biased against the firm.
If people really want to know more about Jones they should visit some offices and meet brokers. For what purpose?

munytalks's picture
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The Judge wrote:
Tough to see an arbitration brewing as most American Funds are trading at/near their all-time highs.  Compare that to the annuities with their high annual fees and you can bet the ranch that almost any of their funds has absolutely trounced the VA.
Not to say that IndyOne made a poor decision; he sold the client what she wanted, and peace of mind (IMO) is more important than performance.

Beg your pardon Your honor- Please re-read your own post- You say "Tough to SEE an arbitration when AF is trading at their all time highs"-
Where did I say a client can't bring a complaint to arbitration? Of course they can. You seem to imply that arbritration wouldn't go their way because of performance of funds in their 'all-time highs'.
I simply pointed out that Net Result does not mean the Financial Advisor is correct is doing what WE would do with our own account.
Imagine telling the Arbitrators-  "Hey, I know what she said about guarantees and volitility- but Look at my charts- look at my graphs- she made more money - didn't she?"
And- have you ever taken the 24? Most asked topic is best interest of the client.

munytalks's picture
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Butkus wrote:
I think it is worth making the observation that if a Jones broker had started this thread with the confusion of annual return for standard deviation, there would have been quite a few comments about the poor understanding of Jones brokers. Just another example of how this forum is heavily biased against the firm.
If people really want to know more about Jones they should visit some offices and meet brokers.

 
Butt Kiss- I will give this one- you are right. If a Jones broker made this mistake He would have quite a tear up-
HOWEVER - in your case and Rankstocks- you would never 'man-up' and admit it like I did.  It's not fair, is it?
And anyway, if I was still at Jones, you'd likely want to hang around my table at Regional so you could learn a thing or two.

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