EDJ Unveils Fee Based Platform
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[quote=new_indy]If you are giving up the buy and hold strategy, the case is legitimate. Otherwise not getting called on a bond is not a “client benefit”. If you stick with the buy and hold strategy, it is not a benefit to the client. You are getting bashed, because you bashed the program of everyone else and built a culture and investment strategy around buy and hold with no advisory accounts. Now you have one, and all of a sudden they are a wonderful idea. Can’t have it both ways.
Tell me what the benefit of any A share being moved into the advisory program might be?[/quote] First, nobody said everyone was goign to move all their clients into it. Much of it will be new money. Some clients want it. Some clients have added significant money since they first opened their accounts, and need/want a new level of service. I have a few clients that had 25K IRA's, and now the retired and rolled over 700K from their 401K. At the time, they had no need for a sophisticated program for 25K. But when you are talking about that amount of money, you can't just put it all into an asset allocation fund and call it a day (jesus, I can't believe I am actually trying to sell and advisory account on this forum...who woulda thunk?). Second, many of us sold A-shares to our clients because that's what we had. Not everyone believes advisory accounts are bad, despite what John Bachman or Fes Shaughnessy might have said. Finally, you are right. Jones was very disingenuous for many years, saying they are not best for clients, then turning around and offering them. But frankly, I think there is some old guard/new guard dynamics at work. Because advisory accounts are not the only thing new to come about in the past few years. That is why I say that not EVERYONE felt they were bad.[/quote] Flexibility how? Because with a true advisory fee platform you don't need to liquidate a client's positions to get them there. It is what creates an unbiased platform. This is NOT an unbiased platform....either the client pays you an advisory fee to go into the plan you have to offer, or they don't. A true fee program would you base a fee on holding their assets, and it's up to the client if they want to follow your recommendations or not. You are only recommending the change because you believe it is in their best interest, and you receive no compensation or change in compensation because of it.[/quote]
Broker24: Valid point, but unless you change the buy and hold strategy, which is unlikely, you are just charging them 1.3% annually to sit on their money. Which if you look at break points on a 700k account, creams them in a very short period of time. I still fail to see the advantage to the client. You can rebalance at NAV in A shares, so once again, unless you are going to be moving clients in and out of etf's and mfd's to respond to market conditions, which I doubt Jones will, where is the client benefit?
[quote=LuvIndy]
I'll chime in here, I think I see where CIB is coming from. (I've been lurking long enough) [quote=Spaceman Spiff][quote=CIBforeveryone]Unfortunately for EJ, they did a half-assed start on this. This is a mutual fund wrap program with funds selected by Jones. - Jones CFA's to be exact. This is the same line all advisors (Indy or not) use when they say "that's why Mercer makes the big bucks!" Come on, they are putting together asset allocation models, it's not rocket science. - No, it's not rocket science, but they do the due diligence on the funds and managers to make sure that the portfolios are built and maintained correctly. No more complaints from you guys about using all American and style drift. Imagine transitioning an American Funds/Franklin Portfolio into this. The clients will be forced to liquidate all of their positions, give up the history on their statements, and probably get a transaction confirmation on every transaction. - Only if they choose to make the change in their account. It's no different in my mind than moving someone's mutual funds to a VA for the income rider. They get trade confirms on that move too. They do it because they see a benefit to do it. Uh, yeah it is. They are selling 3-6 positions and buying 24? A VA is one transaction. Anyway, as we all know...good clients don't choose, they follow their advisor's recommendation. - The point was that if you move to another product, you still have to liquidate the funds thus losing the account history. The client will go from 5-6 funds per account to 25 funds per account. (I have no idea what the hell is going on inside my account!) - It's designed specifically for people who a) don't really want to have to make a decision about rebalancing, or when to switch AMCPX for NEWFX or b) recognize that one fund family cannot possibly be the best at everything and value the diversification. Mr. Client, let's say you get to take a team to take to the world series this year. Would you pick the Cardinals or one of the All Star teams? When it comes down to it, the more activity there is in an account that the client is not involved in, the more they feel like they don't know what's going on. If there are fewer holdings, and the advisor is selectively talking to them before making minor adjustments, they feel much more informed. - You must have missed the part in the conversation about this being designed for those folks who don't necessarily want to worry about talking to you before making minor adjustments. They just simply don't care. They just want you to make them money. We are going to keep up with them on so many other things that what changes in their investment portfolio is almost an afterthought for them. Second, it forces you to maintain a balanced portfolio in each account - This is a bad thing?, rather than across accounts. It creates duplication rather than consolidation. - I'm not sure I understand why this is an issue. If I have two IRAs of equal size for the same person, chances are I'm going to build identical portfolios in each account. I'm not sure I'm following why this is a detriment to the client. BTW, I see this all the time with other similar programs. This is an issue when you realize the Jones method of reverse-DCAing out of mutual fund portfolios is not a good way to draw income. It is far more effective to have an account invested based on when it is going to provide income, and to take income specifically from the appropriate source. Besides that, if you want two separate strategies for diversification, now you are going from 25 funds to 50 funds! Imagine the annual reports and proxy statements! - Funny that something that has been done for 50 years successfully suddenly become a bad idea. But I guess since you're an indy guy you have a lot better ideas than us lowly Jones people do. It is taking the advisor out of the investment selection process almost entirely. - Who would you rather have picking your investments - A team of highly qualified, educated, and monitored analyists whose only job is to make sure that the investments in this program are the cream of the crop OR Spaceman Spiff. See above-this is not rocket science. - So you keep track of management changes, go to shareholder meetings, talk with all of your fund managers personally to learn their money management philosophy,style, and procedures to determine if it is reapeatable or appropriate, look for overlap, manage for risk, etc? You have the time for that and talk with your clients about their estate plans, LTC plans, retirement, education, home ownership, cash flow, business interests, Life Insurance? You must be more of a man than I am. They did the rebalancing right-this is the method I use on my own. The downside to the auto rebalancing is it eliminates a reason to contact the client and removes all "credit" from the advisor. This is not even close to what other firms have to offer their clients in terms of flexibility. CIB[/quote] Flexibility how? Because with a true advisory fee platform you don't need to liquidate a client's positions to get them there. It is what creates an unbiased platform. This is NOT an unbiased platform....either the client pays you an advisory fee to go into the plan you have to offer, or they don't. A true fee program would you base a fee on holding their assets, and it's up to the client if they want to follow your recommendations or not. You are only recommending the change because you believe it is in their best interest, and you receive no compensation or change in compensation because of it.[/quote] [/quote] So in your unbiased platform let's say an EDJ client who owns $500,000 in ICA walks into your office. He tells you that he doesn't want to work with EDJ anymore and wants to know if you can handle his money. You tell him sure, but you charge 1% a year for your unbiased platform. Whether you make any changes or not, you still charge him 1%. You're telling me because he didn't have to liquidate anything to get into your fee based office that he's better off? Because you are unbiased. But still getting paid. For doing nothing. Forever.
First I can almost promise you I would make a change if a client had 500k in ICA. I might diversify it within others within the fund family and put a portion of the assets with a third party manager. I probably wouldn’t use an advisory account in that instance. It just doesn’t make sense. So to answer your question, I don’t have to do an all or nothing scenario and I wouldn’t be storing his funds for the 1%. I don’t do alot of funds anyway, so it isn’t a likely situation for me. Still the scenario you presented backs up my concern regarding what is going to happen with your new advisor program.
I agree to some extent, but if a client already had the A shares, and had no reason to liquidate the full position, I would still offer the two accounts. Put a portion into a managed account program that I get paid on, and leave a portion in the funds and just take the trails. In time, the full positon might end up being managed since like I have said, funds aren’t my thing, but until then the additional 1% is unnecessary.
Your example is why an advisory fee makes so much sense Spiff. He comes to me, and I don’t need to sell him another product just to “get paid.” He becomes a client equal to any other 500k client of mine because he is paying me based on how much I am helping him with.
This way when I saw, “Client, I think you’d be far better off with x y and z”, he knows I am recommending it strictly because I believe that to be the case, and not because it’s what I need to do to generate an income. I am amazed at the significant difference in decision making that has come from my clients since I’ve gone to working on fees. It is easier for them to make decisions they know are right, even if they might not have made them otherwise, and in the end, that is a significant part of the value of the fee-only comp.
Icecold is right on…the client gets far too much value in some years, and far too little in others, but in the end everyone wins.
I’m not disagreeing with your stance. It just isn’t the way I do it. I work alot with structured investments and principal protected securities. As such, I can’t really justify advisory accounts for all of my clients holdings. It is one of the advantages of being Indy, we can all do the things we are best at and hopefully the client always wins. My primary concern when I started mentioning this is that Jones has no background in anything but by and hold mutual funds. As such it is a straight loss for the client unless they change their core beliefs.
If they had wanted, they could have sold C shares to their clients and gotten the 1%, but they went with A shares. Now they want to double dip and put the same A shares into wrap accounts and get the 1%. That isn't really acceptable unless they can justify it.Iceman, I can’t answer for most other professions, but I can tell you that absolutely, CPAs DO charge more for more complex tax returns. I’m not sure that was what you were trying to say, but that’s the way I read your example. I would also not be surprised to see dentists start surcharging potty mouths if some aren’t already. It makes sense to me that if there’s a lot more work involved, the charge may well reflect that. I certainly charge more for fee-based accounts if I believe there will be proportionately more work. Larger accounts are generally more complex (how many ways can you realistically and effectively slice $100K vs. a million?) and the overall fee generally reflects that, even if the charge as a percentage is the same of less than smaller accounts.
Iceman, I can’t answer for most other professions, but I can tell you that absolutely, CPAs DO charge more for more complex tax returns. I’m not sure that was what you were trying to say, but that’s the way I read your example. I would also not be surprised to see dentists start surcharging potty mouths if some aren’t already. It makes sense to me that if there’s a lot more work involved, the charge may well reflect that. I certainly charge more for fee-based accounts if I believe there will be proportionately more work. Larger accounts are generally more complex (how many ways can you realistically and effectively slice $100K vs. a million?) and the overall fee generally reflects that, even if the charge as a percentage is the same of less than smaller accounts.
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True story on the CPA example. I also charge more for a fee based account if they are going to be very very active. Trading options for example or lots of actively managed stock trades and portfolio rebalancing (I mean not portfolio rebalancing across the board for all clients as a group)[quote=new_indy]I’m not disagreeing with your stance. It just isn’t the way I do it. I work alot with structured investments and principal protected securities. As such, I can’t really justify advisory accounts for all of my clients holdings. It is one of the advantages of being Indy, we can all do the things we are best at and hopefully the client always wins. My primary concern when I started mentioning this is that Jones has no background in anything but by and hold mutual funds. As such it is a straight loss for the client unless they change their core beliefs.
If they had wanted, they could have sold C shares to their clients and gotten the 1%, but they went with A shares. Now they want to double dip and put the same A shares into wrap accounts and get the 1%. That isn't really acceptable unless they can justify it.[/quote] I believe that your issue with this is that you are seeing the fee from an investment only standpoint. You are correct that if the ONLY thing that were going to happen with these accounts is to move an A share portfolio into the fee based platform and start charging 1% for nothing extra, it is just a fee to increase revenue. However, the program is far from that. In addition to the investment management that either HQ does or we as FA do (there is a custom model we can use if we choose), there are service requirements that must be fulfilled every year. Using a platform like this will allow us to focus more attention on the planning aspects of this biz than the investment side. I can recommend a client utilize this platform knowing that the CFAs at HQ will be doing their job to watch the portfolios, while my clients and I focus on the bigger picture. There are no biases towards one fund family, no breakpoint issues, no buy and forget mentality, no commission concerns. Just focus on giving attention to the client and working through solutions to their problems. I don't see it as a change in our core belief. I see it as giving our clients one more way to work with us.So what you are saying is that you are going to charge 1% to do what you should have been doing all along? You already got paid on the A share sale and then the trails and revenue sharing to cover your ongoing time.
The platform may be exactly what you say, but the brokers are the same old guys. Are you saying you as a company are really walking away from the buy and hold strategy? Are you truly saying that you guys will dump american funds and move them into a no load or an etf? I will believe it when I see it. Until then I still think it is just an effort to double dip. I sat in a meeting one time with Goldman Sachs and a bunch of Jones guys and remember the outcry when the GS Portfolio manager stated "we are in the money movement business, not the money storage business". It was like the Jones guys were slapped in the face, or their dog got kicked. Until that attitude changes, it won't be a true advisory account.[quote=new_indy]I’m not disagreeing with your stance. It just isn’t the way I do it. I work alot with structured investments and principal protected securities. As such, I can’t really justify advisory accounts for all of my clients holdings. It is one of the advantages of being Indy, we can all do the things we are best at and hopefully the client always wins. My primary concern when I started mentioning this is that Jones has no background in anything but by and hold mutual funds. As such it is a straight loss for the client unless they change their core beliefs.
If they had wanted, they could have sold C shares to their clients and gotten the 1%, but they went with A shares. Now they want to double dip and put the same A shares into wrap accounts and get the 1%. That isn't really acceptable unless they can justify it.[/quote]I regards to your double dipping comment......if a client purchased A shares within the last two years they get that commission rebated back to them. Why only two years? Well anyone who has held for over two years has pretty much broken even as to what they would have paid in the advisory program. You can bash all you want but as a fairly new FA this is a darn good start and only going to get better.The day is about to start...have a great one everyone!!!
[quote=Eyetattoo] I regards to your double dipping comment…if a client purchased A shares within the last two years they get that commission rebated back to them. Why only two years? Well anyone who has held for over two years has pretty much broken even as to what they would have paid in the advisory program. [/quote]
Please elaborate on the math used that results in a two year break even between A shares and your advisory program.
Eyetattoo: two years does not cover the fee #1 and #2 it still doesn’t answer the primary concern that Jones is a buy and hold firm, so why should they give up the lower fee so you can charge them 1% to tell them to hold everything will be fine. I doubt Jones will change decades of tradition and investment style just to justify advisory accounts. I would tend to think investment style will stay the same, the fees will just go up.
Spaceman, if you or other Jones broker takes old A share money and now puts it into Advisory accounts I sure hope you explain to them either how absolutely wrong you (or Jones if you originally disagreed) were in the first place or how hypocritical you are being. What a freaking joke for Jones to say accounts that have been in A share over 2 yrs can be converted to Advisory. And you sit here and wonder why we hate Jones so much. I think advisory is a great way, and Jones SHOULD adopt it. However to convert anything less than 10yrs old goes completely against ever thing they ever claimed. And it probably should be 15 yrs.
Another note is that I THINK that under 2 yrs doesn't get a refund, but rather a DISCOUNT on the advisory fee. Which I imagine is less beneficial to the client and better for Jones. The reason Jones is doing all of this is to benefit Jones not the client. If they would just come out and say that it would be much better. Firms are supposed to make money, just not claim that they exist for the purpose of serving the client.[quote=Dark Knight]
Spaceman, if you or other Jones broker takes old A share money and now puts it into Advisory accounts I sure hope you explain to them either how absolutely wrong you (or Jones if you originally disagreed) were in the first place or how hypocritical you are being. What a freaking joke for Jones to say accounts that have been in A share over 2 yrs can be converted to Advisory. And you sit here and wonder why we hate Jones so much. I think advisory is a great way, and Jones SHOULD adopt it. However to convert anything less than 10yrs old goes completely against ever thing they ever claimed. And it probably should be 15 yrs.
Another note is that I THINK that under 2 yrs doesn’t get a refund, but rather a DISCOUNT on the advisory fee. Which I imagine is less beneficial to the client and better for Jones. The reason Jones is doing all of this is to benefit Jones not the client. If they would just come out and say that it would be much better. Firms are supposed to make money, just not claim that they exist for the purpose of serving the client. [/quote]
Good idea. Brilliant. Jones is the first company to come up with a concept/product/service that will make more profit for the company. Now they should come out and tell everyone that it is simply to make more money for the firm. Boy that is just a brilliant business move. What freakin’ planet did you come from? Anyone that has ever had responsibility for running a major company knows that this is the dumbest statement you have ever heard. Jones (and every firm, and every little “indy” advisor) is in the business of making money, plain and simple. Don’t use your disdain for Jones to somehow change the rules of business. You come up with ideas that will make more money, save more money, create more profit, retain good employees, make happier clients, whatever. But no company comes out and says “oh, yeah, we are going to do this to be more profitable” - except of course when they are talking to analysts.
And if you have actually seen our 5-year plan, it is explicitly stated that we rely too much on a single revenue stream. I think far more than MAKING more money for the firm, it is meant to diversify our revenue base. It’s as much a risk management tool as a profit driver. I think the “new guard” saw the light and knows that AMF and revenue sharing are too big a risk to the firm right now (it’s the equivalent of having 65% of your 401K in your company’s stock). They are simply doing what the “old guard” could not or would not do.
The problem Grasshopper is that for years and years and years Jones said that fee based was evil and wrong and the right way was A shares. Now, they are saying it is ok and the reason they are doing it is somewhat jaded. You are a very smart guy and soon you will understand more than you want to about your company. I had enough and maybe it was helped along by the events in my region but I would have eventually have left Jones even in the best region. I wish you well as you are a genuine article and you can succeed wherever you hang your hat.
Grasshopper? You know, in A Bug’s Life, the Grasshoppers were pretty tough (yeah, I know, they talked a big game, and in the end they got squished). Ohhhh, life with kids…
And frankly, I could care less what Jones said for years and years and years. I care how I can grow my business today and in the future. If you look at my post a bit more carefully, you will see that I am not really defending Jones. I am saying it was a business decision, pure and simple, and that they are correcting past mistakes.