[quote=BigCheese]

Conversation with new prospect...

Yes Mr or Ms Prospect everyone takes kick backs. It's the only way to play. So what.

Spiff-

When I compete against your company I win because I enlighten them how we are SO different. Not one prospect is told about these relationships until I bring it up and ask them to repsond to that statement above. Nor are they told about trading costs. It's one of the hidden secrets in our industry...disclose on documents no one reads and its acceptable in the industry.

I have said all along...get rid of these dirty secrets and we'll cleanup our industry. LPL does not give me one dime from the relationships, in fact, they reduce my ticket charges that I pay.

You don’t have to and I don’t believe you referenced it all. There isn’t a debate to be had Spiff. Your company and mine are dirty but they play by the rules. I am making the case for total transparency. A concept that appears to be foreign in our industry.

[quote=BigCheese]You don’t have to and I don’t believe you referenced it all. There isn’t a debate to be had Spiff. Your company and mine are dirty but they play by the rules. I am making the case for total transparency. A concept that appears to be foreign in our industry.

Edward Jones advisors were able to start selling MFS products off of the preferred list as of Monday. The firm’s other preferred mutual fund providers include <SPAN =companyName>American Funds, <SPAN =companyName>Franklin Templeton Investments, <SPAN =companyName>Goldman Sachs Funds, <SPAN =companyName>Hartford Mutual Funds,<SPAN =companyName> Lord Abbett Funds, <SPAN =companyName>OppenheimerFunds and <SPAN =companyName>Van Kampen Investments.

Getting onto the platform is a multi-year process, but once on, preferred firms typically see a surge of flows from Edward Jones’s network of independent advisors, says <SPAN =companyName>Cerulli analyst Scott Smith. In part, that is because of the nature of Edward Jones branches, which typically consist of an advisor and  an assistant. “Stand-alone advisors are more likely to rely on the due diligence of their providers,” Smith says. “I think the Edward Jones advisors may be more apt to look to their home office for guidance.”    

What glorious 3 or 5 Pack of funds is MFS flooding Jones advisors with ? What magnificant performers should FA’s put investors in “after the performance”, like Van Kampen’s All Weather and Franklin’s Founding Funds and American’s Income Foundation ?

It’s a five pack!!! Surprise!

Can we purchase puts on that 5 pack ?!!!

To be serious for a minute…is there any indication of what the impact on American Funds, or other Jones preferred funds for that matter, will be from what must be a mass exodus out of the funds and into Advisory Solutions? Considering how much existing money apparently has gone into this, it must be creating outflows at American Funds beyond what they are used to. I would think it has to be stressing the system at American Funds, and maybe others to an extent. Any comments?

To be serious for a minute…is there any indication of what the impact on American Funds, or other Jones preferred funds for that matter, will be from what must be a mass exodus out of the funds and into Advisory Solutions? Considering how much existing money apparently has gone into this, it must be creating outflows at American Funds beyond what they are used to. I would think it has to be stressing the system at American Funds, and maybe others to an extent. Any comments?

A couple of things. First, when I went Indy I could put an advisory fee on my existing portfolios, and did not need to turn them over to get the fee. Jones is forcing the advisor to dump their American Funds to earn the fee. This is an entirely different scenario.

Besides that, the amount of assets that leaves Jones to go Indy is a drop in the bucket compared to the dollars that are going into A.S. right now.

This is not a Jones issue, this is an American Funds issue. My problem with it is that Jones is putting the advisor in the position of dumping existing portfolios to earn their advisory fee, and American Funds is potentially suffering from the Jones move. If they allowed their advisors to do it as Indys do, there would not be this mass exodus.

I am not trying to turn this into a Jones rant, but trying to assess the real impact this Jones move has to be putting on their fund vendors for those of us that are continuing to have clients hold American Funds while they pay us for advice.

I think there is defintely some impact on AMF.  But I think the amount is probably overstated.  I think the last I heard they had like $10B in advisory.  So let’s assume 70% of that was from existing assets, so $7B.  Of that, let’s assume 25% was from American Funds (which is higher than the firm average of all assets), so round up to $2B.  Does anyone think $2B is going to even register on AMF’s radar?  Seriously.  They have like $850B in assets.

[quote=B24]I think there is defintely some impact on AMF.  But I think the amount is probably overstated.  I think the last I heard they had like $10B in advisory.  So let’s assume 70% of that was from existing assets, so $7B.  Of that, let’s assume 25% was from American Funds (which is higher than the firm average of all assets), so round up to $2B.  Does anyone think $2B is going to even register on AMF’s radar?  Seriously.  They have like $850B in assets.

OK, since you asked. Here’s how I justify the fee:

1. I don’t have to do trades to get paid.
2. I can make adjustments WHEN THE TIME IS RIGHT (i.e. tax planning over time)
3. The client knows I have no incentive to trade when I make a recommendation for a fund swap.
4. I can spend time with them showing them their retirement illustrations, tax strategies, debt reduction, mortgage calculations, etc., and not need to justify it with a trade every now and then.
5. When I meet my goal with them of having all of their assets, they are compensating me the same way a new client is. In other words they don’t become a liability to me when they are all tapped out financially and I’m only getting trails (I’m honest with them).
6. I don’t live my life chasing dollars, and they like that (I’m honest with them).
7. My income is based on their portfolio value, not the number of rollovers I bring in that month (I’m honest with them).

You’d be surprised at what being straight with people about how we get paid would do for your psyche. It really changed mine.

Luv, I think you misunderstood me. I wasn’t suggesting that you can’t justify a fee based program, I was just saying that this was Jones’ thought process behind it. I totally agree with what you are saying.



I think there would definitely be a problem for Jones if they just said “OK, you can now wrap up your existing fund portfolios”, without implementing a formal advisory program with all the bells and whistles. The problem is, to qualify as a true advisory program (versus the retired “fee-in-lieu of commission” programs), you need to be showing that you are offering additional value. Frankly, migrating to fee-based is an evolution, and many people at Jones (and other firms) would simply wrap up their portfolios and give them no more service than before, if left to their own devices. In Jones’ defense, they really needed to come up with a formal program with very defined value-added services (formal fund vetting process, auto rebalancing, Investment Policy Agreements, performance reporting, etc.) in order to justify the new fee.



Trust me, I know the value that can be added and the benefits of fee-based advising.

B24, I see your point now. I agree you are correct that a typical Jones person probably doesn’t have the tools available to customize a real plan for someone, and so they came to the conclusion they did.

Beyond that, it does make me wonder what the effect on the fund managers is with all of this automated rebalancing going on in the industry in general, not just Jones. And what happens when a manager of one of these programs decides for some reason to eliminate a fund and yanks all of that cash out of it on one day.

In terms of Jones, It bugs me that a whole generation of advisors is under the impression that their plan is what an advisory fee plan looks like, and they know nothing different.

Good banter.

B24, I see your point now. I agree you are correct that a typical Jones person probably doesn’t have the tools available to customize a real plan for someone, and so they came to the conclusion they did.

Beyond that, it does make me wonder what the effect on the fund managers is with all of this automated rebalancing going on in the industry in general, not just Jones. And what happens when a manager of one of these programs decides for some reason to eliminate a fund and yanks all of that cash out of it on one day.

In terms of Jones, It bugs me that a whole generation of advisors is under the impression that their plan is what an advisory fee plan looks like, and they know nothing different.

Good banter.

I’ve talked to SEVERAL and hear the same things frequently. I feel like I have a pretty good idea. I can’t speak for all of them obviously, but I feel pretty confident I know what I’m talking about.

[quote=LuvIndy] B24, I see your point now. I agree you are correct that a typical Jones person probably doesn’t have the tools available to customize a real plan for someone, and so they came to the conclusion they did.Beyond that, it does make me wonder what the effect on the fund managers is with all of this automated rebalancing going on in the industry in general, not just Jones. And what happens when a manager of one of these programs decides for some reason to eliminate a fund and yanks all of that cash out of it on one day.In terms of Jones, It bugs me that a whole generation of advisors is under the impression that their plan is what an advisory fee plan looks like, and they know nothing different.Good banter.

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Not knowing how every other firms’ advisory program works does not make an advisor bad. Honestly, good advisors are not defined by which advisory plan they use. They are defined by how they implement them with their clients, and how well they service their clients. IMHO, most Jones advisors take a lot of pride in the level of service they provide to their clients.

B24-