EJ - Fined $75 mil...again

93 replies [Last post]
uwec86's picture
Offline
Joined: 2004-11-30

Looks like EJ got another big fine from the SEC in a Friday announcement:
http://sec.gov/litigation/admin.shtml

33-8520A
Jul. 13, 2007
Edward D. Jones & Co., L.P. Other Release No.: 34-50910A I guess they just can't shake the Revenue Sharing thing I started.

Spaceman Spiff's picture
Offline
Joined: 2006-08-08

You're an idiot.  If you would have read the release instead of jumping to conclusions you would see that it is an amendment Jones filed for that caused the re-release of the original filing. 
 

AllREIT's picture
Offline
Joined: 2006-12-16

Quote:Prior to the late 1980s, Edward Jones had internally designated
certain of the mutual fund families with which it had selling
agreements as “recommended.” In the late 1980s, Edward Jones approached
certain of those mutual fund families (“Preferred Families”) with which
it had long-standing relationships and sought to obtain revenue sharing
from them. Edward Jones set an internal revenue sharing target of 25% of the advisory fees
earned by those mutual fund families on the mutual fund assets purchased
or held by Edward Jones’ customers, plus in most instances sought an
equity interest in their advisers or distributors.

Prior to the late 1980s, Edward Jones had internally designated certain
of the mutual fund families with which it had selling agreements as
“recommended.” In the late 1980s, Edward Jones approached certain of
those mutual fund families (“Preferred Families”) with which it had
long-standing relationships and sought to obtain revenue sharing from
them. Edward Jones set an internal revenue sharing target of 25%
of the advisory fees earned by those mutual fund families on the mutual
fund assets purchased or held by Edward Jones’ customers, plus in most
instances sought an equity interest in their advisers or distributors.

8. Edward Jones’ distributed 11% to 12% of its net income,
which includes net revenue sharing, to its limited partners and 10% to
12% of its net income to its subordinated limited partners each year
and the residual is distributed to the general partners.
Thus, the majority of any revenue sharing received by Edward Jones,
after operating expenses, was distributed to the firm’s general
partners, some of whom make decisions regarding which mutual fund
families become “Preferred Families” and others of whom are Edward
Jones IRs who recommend the Preferred Families to their customers.
During 2003 alone, the revenue sharing received by Edward Jones was equivalent to 33% of the net income of Edward Jones’ parent holding company, Jones Financial.

11. For example, during the relevant time period, Edward Jones’
Director of Mutual Fund Marketing described his “greatest contribution
to the Firm’s bottom line” as “the Department’s ability to continue the
focus on selling preferred fund families and the subsequent leverage
this gives us to negotiate revenue sharing programs with vendors.” He
also represented to the IRs that Edward Jones directly passes the
revenue sharing income along to the “IRs who did the work to get the
money in the first place.”

Soothsayer's picture
Offline
Joined: 2005-02-24

So, if the limited partners are getting the high number at 12%, and the subordinated partners are getting the high number at 12%, then that means the GPs are getting no less than 76% of the revenue sharing pie.  And there, ladies and gentleman, is the meat and potatoes of the $75 million settlement. 

uwec86's picture
Offline
Joined: 2004-11-30

I just know what the Investment News reporter told me.  I thought it was odd that the fine was the same as last time so I emailed him and asked...I really didn't want to read the whole thing... I thought that was his job.  Go talk to the Inv. News reporter.
My apologies Spiffy...I am an idiot...but then again...you're still at Jones...hmmm?

bspears's picture
Offline
Joined: 2006-11-08

Thanks for the salt in the wounds, is what Spiffy should have said. I love this stuff.  GP"S SUCK...and they suck cold hard cash out of the IR and the investors.  Please read and understand all you Jones IR's and newbies and people looking to go to Jones.  This firm tries everyday to cloak its true objective...MAKE AS MUCH MONEY FOR THE GP'S AS POSSIBLE...that's it..no more no less.

success's picture
Offline
Joined: 2005-02-01

I am ok making 250k a year with no risk.  Weddle and the other GP's make millions; ok by me.  Someones gotta run the firm.

Spaceman Spiff's picture
Offline
Joined: 2006-08-08

Spears are you a democrat?  Cause I'd swear that if we were talking politics the thoughts you have on how the money at Jones should be shared would sound very democratic.  I think they call it wealth redistribution.  Take the money from the rich, give it to the poor so that everyone is equal.  Never mind that the rich have put years of blood, sweat, and tears into building the business to what it is today. Never mind that they have their own dollars at risk in a company they believe in.  How dare they make more money than me.  Surely they don't work any harder than I do or deserve it more.  In your office, does your secretary make more, less, or the same amount of money as you?  Why don't you take a larger cut from your net and give some more to her?  I think that would be fair to her.  After all, she's a part of your business too and she deserves to make more than you pay her.
For all the kool aid drinking you guys say we Jonesies do, you've had your fair share of it from the other side.  It's just a different flavor.  

Dust Bunny's picture
Offline
Joined: 2007-05-07

I am ok making 250k a year with no risk
How do you figure that you have no risk?  You don't have any E&O insurance.
You run the risk of having zero income every month.  You have the risk of changing administrative policies that are beyond your control.   You have the risk that the markets are going to take a header and your clients will hate your guts.  You have the risk that interest rates could rise and devastate your client's bond holdings.
Life is full of risk.  If you think you have none and are blithely skipping through life...tra la la....I wouldn't want you to be my advisor.

bspears's picture
Offline
Joined: 2006-11-08

Skippy, Are you high?

bspears's picture
Offline
Joined: 2006-11-08

I hope not...I hope your on remote access in front of a 85 yr old widow, telling her what a great investment the 15 year muni would be for her..I'd say 50% of the GP's don't due squat...brought in from the good ol boys railway..If your not smart enough to see a huge majority of the revenue flows to the privileged few, well so be it..you're a dumbass. Keep preachin and one day, yes one day, you might be asked onto the train.  Considering my assistant makes a few dollars more per hour than she was at EDJ, and MY pay has more than doubled, I'd say its a win-win. Your a poor, uninformed network marketing wannabe...good luck and good selling.

success's picture
Offline
Joined: 2005-02-01

bunny,
I have been though a market crash 200-2002 and was just fine.  Stressed?  Sure.  we all were.  I have been through clients getting statements and have bonds prices down 10-15%.  Fine again.  Finally, I dont start the month at zero.  If you are implying that i dont have fee based, that's ok too.  I am not against it, so I would agree that it's ok for some clients.  My point was the GP's take all the financial risk for Jones.  For that, they should be paid.  They are the owners!!  Most on this site say that indy is better b/c now you are an owner.  Well, i gurantee you no one on this site makes $10M as an owner.  Oh by the way, i would also bet that if you are Indy and you hired another advisor down the road, you would be giving that new person a payout of their gross.  They would not own 50% of your practice.  As soon as you do that, you are now a GP.  You get a cut of your advisors gross.  SO, dont bitch and gripe about owners making all the money if you are not prepared to expand your practice by taking on equal partners, even if you are the one who started the business.

Dust Bunny's picture
Offline
Joined: 2007-05-07

SO, dont bitch and gripe about owners making all the money if you are not prepared to expand your practice by taking on equal partners, even if you are the one who started the business.
You must have a reading comprehension problem.  I was merely pointing out that your statement that you don't have any risk was a bit on the ...ok a lot ....on the wrong side.
As to starting the month at zero: I don't count trails.  Unless you have enough people dollar cost averaging to make a significant amount of commissions, you are basically starting at zero....as are most of us.  Nothing wrong with that, but it is a risk. 

success's picture
Offline
Joined: 2005-02-01

Bunny,
I guess i meant more on financial risk side of Edward Jones.  We all have the risks you stated.  Since the GP's assume more financial risk, then they should make the most money, correct? Risk VS Reward.

bspears's picture
Offline
Joined: 2006-11-08

Its an LLC....changed back in 96....so NO they don't bear all the risk.

success's picture
Offline
Joined: 2005-02-01

For the sake of this discussion, lets agree they have more risk than I do.

theironhorse's picture
Offline
Joined: 2007-03-03

haha, so the people higher up on the totem pole make more money?  shocking new concept there.  unlike all the CEO's of public companies who only look out for shareholders right?you guys take your hatred of Jones and apply it to most any industry concern.  I was there, have left there recently, but cannot see the point of being so freaking bitter day in and day out.

Soothsayer's picture
Offline
Joined: 2005-02-24

Spaceman Spiff wrote:
  Never mind that the rich have put years of blood, sweat, and tears into building the business to what it is today. Never mind that they have their own dollars at risk in a company they believe in.  How dare they make more money than me.  .
Spiff, while I was at Jones I met GPs such as Greg Dosman.  That guy had exactly zero blood, sweat, or tears into any business.  He did not deserve to make one dollar more than me on his best day and my worst.  That, my friend, is an absolute fact.  And that fact is what drove me from Jones. 

troll's picture
Offline
Joined: 2004-11-29
troll's picture
Offline
Joined: 2004-11-29
success's picture
Offline
Joined: 2005-02-01

i agree with horse.  You can apply the same logic to almost any large company in America.  There are people in every organization that make more and probably dont deserve it.  Its too complex to decide who should be rewarded and who should'nt.  Some of us actually like being in an office by ourself and some want to be in that corporate america zoo.  While it's not for me, it is for some.  Some folks only want to be in the field a short time, find out that retail is not for them, so they go to St. Louis.  Fine with me.  I like where I live.

bspears's picture
Offline
Joined: 2006-11-08

Joe, It just shows "Do whats right for the client is ALL we believe in"..is...well...very damn lucrative!! Also, the footsoldiers are stupid.

Spaceman Spiff's picture
Offline
Joined: 2006-08-08

I'm amazed that Jones gets bashed so hard for having execs who get paid a decent amount of money.  Doing what is right for the client is EXACTLY why the GPs can make the money they do and the FAs can continue to make the money they want.  The footsoldiers aren't stupid.  Not any more stupid than the guys who work for any other brokerage firm where there's a grid.  We know who we work for and if we decide to continue being footsoldiers it is with eyes wide open. 
Joe - It doesn't bother me that the top 4 execs were Jones people.  I'm happy for them.  I'm confident my name won't be on that list anytime soon, so I just look at it and shrug.  Maybe next year. 
OK spears, let's see you come up with some ideas that would fix Jones.  You run your mouth ALOT bashing Jones, but you have NEVER said anything about how you would have changed things if given the opportunity.  So, here's your chance.  Give us your best thoughts on how to turn Jones into a place that you would have been happy to associate with for the rest of your career.  Don't chicken out and give me a "you couldn't pay me enough to stay at Jones" answer cause that's just crap.  You just replaced Weddle.  What now smart guy? 

FreeFromJones's picture
Offline
Joined: 2006-11-29

Spiff,
Good response.  You're right to say we all have our reasons for working where we do, and there are better places for some and some places none of us would work. Enjoy your time at Jones and stand-up for what you believe in.  BSpears, you had your reasons for leaving and so did I.  Obviously, we weren't asked how we thought things should be run, but I'm interested in your thoughts.  Be creative and be profitable!!

bspears's picture
Offline
Joined: 2006-11-08

Why would I give you losers any ideas on how to fix the fraud machine.  I only point out the other side of Jones...not the..we're the best firm to work for , we're the only firm that does what's right for the clients...blah blah blah...your all frauds...GET BACK ON YOUR DAMN PHONE SPIFFY...BEFORE I CALL YOUR SEGMENT 2 LEADER...

troll's picture
Offline
Joined: 2004-11-29
Spaceman Spliff's picture
Offline
Joined: 2007-03-29

Spaceman Spiff is Jim Weddle.

bspears's picture
Offline
Joined: 2006-11-08

Joe, Why would I sit here and waste my time trying to move EDJ's forward?  If you think its a great firm, join the green and yellow. Tell us about it when you get done doorknocking, piker.

bspears's picture
Offline
Joined: 2006-11-08

Weddle would be to busy coming his hair to post...even I know that....

Spaceman Spiff's picture
Offline
Joined: 2006-08-08

I figured that would be about what I would get.  I didn't think that you would pony up and actually share some rational thoughts behind the problems at Jones and how, if you were in charge, you would fix them.  I'm beginning to think you're incapable of anything other than the anti-Jones hate talk. 
So, let's try this again.  You've just been named Managing Partner at Jones.  What do you fix first?  How do you make sure that Jones is around 10 years from now and that clients are happy and well served?
I'll open it up to anyone else.  If the GPs read this forum like everyone says they do, maybe they can pass one of our ideas off as their own. 
 

bspears's picture
Offline
Joined: 2006-11-08

Forgive me Joe, I am bitter.  I will admit I HATE EDJ's. I trully think they are the most underhanded firm in the industry.  They go around spewing this propaganda and the other hand is in the back pocket of the IR and client.  Just the worst in my mind.  Have you ever seen the movie on Enron...makes me think of Jones.

bspears's picture
Offline
Joined: 2006-11-08

My first move as Managing dirtbag,
FIRE SPIFFY for low production and to many internet forum postings.

Dust Bunny's picture
Offline
Joined: 2007-05-07

1. get rid of the antique DOS based techonology system and create a high speed internet system of research and storage capabilities.   Have a storage/library on line of forms from the various vendors that are commonly used and keep it up to date.  Client approved reports and sales materials to keep each rep from having to invent the wheel and download duplicates.  Library of approved letters. 
2. Set up a series of interactive web seminars and training sessions.  Get rid of the time consuming traveling that burden the IRs. Especially those in more remote and rural areas.
3. send the Regional Leaders to some sort of management training.  Give some of them a personality transplant. 
4. More accountability and oversight of the actual management skills of the RL.   Get rid of the nepotism and favoritism in the regions.  A bad RL can kill the momentum in a region
5. Eliminate the point system for trips and incentives that tend to encourage the reps to jam clients into inappropriate areas so they can get the points they need.  In fact, get rid of the trip/reward system anyway as the SEC and NASD are looking askance at this.
6. Create a user friendly and economical fee based platform.  Make sure that people actually are trained and understand the system.
How's that for a start.

bspears's picture
Offline
Joined: 2006-11-08

The rest of my 10
2. Kick Bachman to the curve
3. Make D Hill clean the bathrooms
4. Tell the mutual fund preferreds how sorry I was for EDJ's holding a gun to their heads, and have Hill and Bachman bend over so they could wip their ass with a board.
5. Change the payouts to 55% on ALL trades + pay the expenses of the office..except TP. (Thats for you Joe)
6. Eliminate the love making at Regional meetings between RL and wannabes
7. Base LP on tenure and nothing else
8. Sell myself to Amway
9. Allow no one to take over a large office with less than 10 years experience
10. Sell all non producing assets and focus on putting more money into the IRs in the field.
 

bspears's picture
Offline
Joined: 2006-11-08

Bunny, your articulate and I'm rough around the edges, but we have like thoughts.

Cowboy93's picture
Offline
Joined: 2005-05-10

I've heard about the Personality Transplants they are doing now.  Some neat technology!!

IndyEDJ's picture
Offline
Joined: 2006-12-13

Bunny:
I found your list very interesting because you could have said the same things about EDJ when I left them in 2000.  Jim Weddle is a good man and he has a long way to go to turn the firm around and get it into the 21st Century.  If he doesn't, Big Bad Wachovia is just down the road.
IndyEDJ

bspears's picture
Offline
Joined: 2006-11-08

Also, I would print the correct day we were founded and not some bullsh*t year...

now_indy's picture
Offline
Joined: 2006-07-28

bspears wrote:
Also, I would print the correct day we were founded and not some bullsh*t year...

I had the Ted Jones picture on my wall (the one at the farm with the dogs), and a client asked me who it was. I told them that it was the founder's son. They thought for a second and then said "I thought y'all were founded in 1870-something."  That was fun to talk my way out of.

now_indy's picture
Offline
Joined: 2006-07-28

My first move as managing partner would be to fix the BS P&L statements.  I think I was one of like 4 people in our region who could actually read them.  That stupid "allocation" number is crazy, and don't get me started on P&L "credits." 
Oh look, you made a profit, let's put that profit number into our Jack Lalain juicer (ie, the profitability bonus calculator), and see what comes out. So, for your $10,000 profit this trimester, your bonus is $193.  Congrats.

Maxstud's picture
Offline
Joined: 2005-12-29

IndyEDJ wrote:Bunny:
I found your list very interesting because you could have said the same things about EDJ when I left them in 2000.  Jim Weddle is a good man and he has a long way to go to turn the firm around and get it into the 21st Century.  If he doesn't, Big Bad Wachovia is just down the road.
IndyEDJI think bunny left EJ around 2000 or so, not sure just from what she posts.

Spaceman Spliff's picture
Offline
Joined: 2007-03-29

10. Eliminate the green screen and the 1980s throwback computer system.
9. Stop new college grads from getting plum offices because they are the regional leader's kid.
8. Up the incentives for transfer brokers.
7. Stop hemming and hawing about fee-based and just do it.
6. Stop opening 5 offices in small towns.
5. Itemize every single thing on the P&L statement.
4. Stop pushing credit cards.
3. Develop more tools for rich investors.
2. Get better research.
And, the number one thing I would do if I were Jim Weddle tomorrow:
1. STOP REVENUE SHARING. IT'S NOT ETHICAL AND BARELY LEGAL!

Spaceman Spliff's picture
Offline
Joined: 2007-03-29

Obviously, none of this will happen within a foreseeable timeframe (except maybe the computer improvements and the development of a fee-based platform), so I guess the only alternative is to go somewhere else. So if you GPs really read this forum, make a close note of everything I just wrote. That's why so many brokers are bailing out.

FreeFromJones's picture
Offline
Joined: 2006-11-29

B Spears and now_indy,
I found it amusing that you both would bring up the "we have been in business since ___" date issue.  I woke up this morning thinking about B's comments about fraud and liars and on this point he is correct.  They shove so much B.S. down your throat so you can just spew it out at people when you meet them. "Oh, you've never heard of Edward Jones?" "We've been aroung since 1871 and there's an office on every street corner.", "I'm really suprised that you've not seen some of our 10,000 offices." Spiff, there is and always will be some bitterness because the Jones guys in town are my competitors and always will be.  In fact, they always were, even when they were telling me "we're here for you, (just don't get in my way and I'll smear you all over town if you get near anyone I'm prospecting for)." I was told to just mention the RL's name, it'll add credibility.  It just added to his book because the people think an Edward Jones office is connectected to every other office and we all get paid no matter which office the business is done in.  That's why they put so many offices in small towns, just to add visibility to the older offices and drive business to the GP in town.
There are some good EDJ brokers but for the most part they all just spew the BS they are told to spew by the GPs.

bspears's picture
Offline
Joined: 2006-11-08

Free brings up a wonderful wire I received from a vet in another town.  I was out dking one day. Stopped by a farmhouse, proceeded to knock on the door.  No answer.  Left a card and rates in their door.  A week later, I followed up with a phone call.  "Oh we're with xxx broker in x town. Oh, sorry I didn't know this. (EDJ SPEW NEXT) If you need to drop off a check or get a copy of your statement, we're right here in town."  Two days later I get a 3 page wire warning me to stay away from his clients...I will take clients from you ....blah blah blah...Don't bite the hand that feeds you..bullsh*t.  I will call St Louis and let them know your prospecting my clients...Here I've been with EDJ's about 4 months.  What a wonderful feeling.  THey can all burn in hell for that matter.  Am I prospecting the client now...YOU BET!! F u....

Dust Bunny's picture
Offline
Joined: 2007-05-07

Spaceman Spliff wrote:
10. Eliminate the green screen and the 1980s throwback computer system.
9. Stop new college grads from getting plum offices because they are the regional leader's kid.
8. Up the incentives for transfer brokers.
7. Stop hemming and hawing about fee-based and just do it.
6. Stop opening 5 offices in small towns.
5. Itemize every single thing on the P&L statement.
4. Stop pushing credit cards.
3. Develop more tools for rich investors.
2. Get better research.
And, the number one thing I would do if I were Jim Weddle tomorrow:
1. STOP REVENUE SHARING. IT'S NOT ETHICAL AND BARELY LEGAL!

Good list.  I left in 2003 and it seems things haven't changed at all.
The P&L obfuscation was the main reason I left.  I had the distinct feeling that I was being screwed, and I was right.  No kisses, no  flowers, no cards 
 
 

bspears's picture
Offline
Joined: 2006-11-08

I quit looking at my p/l when I made more with a lower production month than my best month ever. 

success's picture
Offline
Joined: 2005-02-01

WOW, bspears is kinda bitter.  Either you didnt get along with your RL, you were below standard and/or you you think everyone is out to get you.  Maybe all 3.  Typically, not in all cases, by typically, if a FA is happy producing at a good level, has a decent RL, and has a reasonable personality, then he/she will not have this disgust with Jones.  He/She may still seek other opportunities, but this hatred is not good for you.  I gurantee you that any other firm would never had paid me earnings on a LP that had not been issued.  JOnes had no obligation to pay me in 2005 and 2006 for my LP, but they did.

Dust Bunny's picture
Offline
Joined: 2007-05-07

bspears wrote:I quit looking at my p/l when I made more with a lower production month than my best month ever. 
No kidding.  When I looked at my P&L I noticed that the amounts that were deducted became proportionally larger as my grosses when up.    I felt like the Red Queen in Lewis Carroll's "Through the Looking Glass" that "in this place it takes all the running you can do, to keep in the same place."

bspears's picture
Offline
Joined: 2006-11-08

Why wouldn't they pay you your earnings...they were paying themselves. Revenue sharing was still flowing in...trades were still being made...TRUTH HURTS.

Spaceman Spiff's picture
Offline
Joined: 2006-08-08

Good stuff Babs.  Responses that are actually thought through. 
Dust Bunny wrote:
1. get rid of the antique DOS based techonology system and create a high speed internet system of research and storage capabilities.   Have a storage/library on line of forms from the various vendors that are commonly used and keep it up to date.  Client approved reports and sales materials to keep each rep from having to invent the wheel and download duplicates.  Library of approved letters.  - They're working on getting rid of the green screens.  I'd guess in the next couple of years they will completely go away.  All of the vendors we use have links on Jonesnet to their websites where all of the documents are available for printing.  If you can't find it, just call the Jones dedicated team and they'll point you right to it.  The library of approved letters is called Word Power.  It's not all inclusive, but it covers probably 90% of anything I'd ever want to send out.  I'm not sure what you mean by client approved reports and sales materials. 
2. Set up a series of interactive web seminars and training sessions.  Get rid of the time consuming traveling that burden the IRs. Especially those in more remote and rural areas. - I know they're doing a lot more web based things today than before you left.  New IRs still have to do some training.  Other than Regional Meetings a couple of times a year, I really don't do much travelling.  However, I am in STL, so maybe I would do more if I lived in say, Northern CA.
3. send the Regional Leaders to some sort of management training.  Give some of them a personality transplant. - They go through courses called LDC and Advanced LDC before they ever make it to RL status.    
4. More accountability and oversight of the actual management skills of the RL.   Get rid of the nepotism and favoritism in the regions.  A bad RL can kill the momentum in a region - I agree.  However, if your RL were to actively manage your, like a BOM, should he stay in production?  Would it piss you off if he called and asked why you weren't placing any trades?  Or if you had to report your every move to him?  One of the things I love/hate about Jones is that nobody manages me.  Thus the amount of wasted time on this forum.  Nepotism and favoritism are just a part of the business world.  The favorite guy gets some favors.  It's not going to go away.
5. Eliminate the point system for trips and incentives that tend to encourage the reps to jam clients into inappropriate areas so they can get the points they need.  In fact, get rid of the trip/reward system anyway as the SEC and NASD are looking askance at this. - I would venture to say that most of us don't think about those trips when we're looking at managing assets.  We focus on the portfolio system and the asset allocation there.  At least I do.  I might make a push for something like LI if I think I'm going to need a category, but the only reason I might have to push is because I haven't been doing a good enough job asking people about it in the first place.  They aren't going to get rid of the trips until someone tells them they have to.  
6. Create a user friendly and economical fee based platform.  Make sure that people actually are trained and understand the system. - I agree wholeheartedly. 
How's that for a start.

Please or Register to post comments.

Industry Newsletters
Investment Category Sponsor Links

 

Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×