Jones to RJFS --THANKYOU!
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[quote=iceco1d]On a comparable program (regular rebalancing 4x or 2x per year, using mutual funds) at my firm, the numbers on a $250K account would be as follows:
1.35% average fee to client (we have no say in the fee). 0.88% would hit the "grid" (47 bps "program fee"). No ticket charges (regardless of what funds you're using) 12b-1 fees are paid out to the FA (Q & NQ accounts), if you use funds that pay them (there is no difference in fee structure if you use A shares @ NAV w/ 12b-1s, or if you use advisor shares w/o a 12b-1). So in my example...the highest payout at my firm is 85%; if you are using Vanguard funds for this example, 88 bps would hit your grid @ 85% for a net payout of 74.8 bps. This is a 49.9% actual payout, based on the fee charged to the client. In the same example, if you use funds that pay a 25 bps 12b-1, client would still see 1.35% in fees on the statement, 88 bps would hit your "grid' as fee revenue, and another 25 bps would hit your grid as a trail. In this case, 1.13% hits your "grid" of 85% (no ticket charges, again). 1.13% x 85% = 96 bps net. Actual payout based on the 1.5% charged to the client is a 64% payout. 96 bps on 1.75% (the 1.5% + .25% 12b-1, total compensation related charges tot he client) is a 55% payout. Some funds on this platform have revenue sharing agreements with the b/d on top of it (that doesn't affect our compensation, but still...). B/Ds love to play games. Indies notoriously love to play with program fees and ticket charges, so lets get this out in the open if we are talking about haircuts. [/quote] Finet example on a $250,000 account would be: 21bp admin fee, 90% payout, no ticket charges,(unsure about 12b1 fee rebate as I use stocks, etfs, or institutional share funds,etc) So: 1.35% client fee less 21bp admin fee= 1.14% Gross x 90% grid payout= 1.026% net to practice. (1.026 / 1.35 = 76% payout against client fee)Jones doesn’t hit us with a program fee. So, my compensation on advisory business at $250K would be 1.35% @ 40%. Clients get rebated the 12-b1 fees. They’ve got this weird pooling of shareholder accounting fees thing that they do, but basically the clients get those rebated too. None of that affects my compensation. The only time my payout gets affected is if I discount below a certain percentage or if I’m discounting and the account falls below $100K. If those things happen my payout drops to 30%. Consequently, I’m not discounting anything.
RJFS:
Advisor can set whatever price he/she wants. I average about 1.1% to be competitive but fair. RJ takes .09% admin, and .14% for advisory services or something. 1.35% (to use the same as everyone else) Less .23% Equals 1.12% - 100% of this number is paid to me. Client pays $30 transaction charges on stocks or mutual funds, but avoids it on systematic transactions or exchanges. No charge on sell trades. Therefore after the funds are in place we can systematically buy into funds for no transaction charge, which I do 99.9% of the time. $100,000 client $1120/yr to me Jones $540 to advisorQuestion for all…how do clients feel about paying ticket charges on top of management fees on top of mutual fund expenses? My biggest concern would be transferring in a client with a bunch of junk securities - they pay ticket charges to sell them, then pay ticket charges (possibly) to buy “your” stuff, plus the management fee (and then MFD expenses, which may or may not be high).
I was curious how people work around this, and how many eat the ticket charges versus charge the client.Good question, and another reason I do trades systematically over a number of weeks (normally 4-6). If we unwind and reinvest over that period of time, we increase the chances that we hit a good day to either sell or buy. That potential difference in one percent creates the opportunity to offset the one-time transactional charges they will see up front.
The same applies when we add a new fund, they pay $30 for the first trade, but average in and often times end up with a lower average price, offsetting the $30 charge.
Jones doesn’t hit us with a program fee. So, my compensation on advisory business at $250K would be 1.35% @ 40%. Clients get rebated the 12-b1 fees. They’ve got this weird pooling of shareholder accounting fees thing that they do, but basically the clients get those rebated too. None of that affects my compensation. The only time my payout gets affected is if I discount below a certain percentage or if I’m discounting and the account falls below $100K. If those things happen my payout drops to 30%. Consequently, I’m not discounting anything.
Au contraire mon frere (Yes I googled the spelling). If you are still presenting the program in that light, I would suggest you do some more reading.
Hulk, stop spoiling Spiff’s presentations. He doesn’t want to know what he doesn’t know…gee wiz…
Yeah, SPiff, it's more like you get rebated the 12b-1 and revenue sharing, but that generally offsets the shareholder accounting charges. It's fine right now, as there is generally a net credit to the account, but my concern is that some day if/when 12b-1's and revenue sharing go away, or Jones uses fewer funds with 12b-1's/revenue sharing, the Accounting charges may actually end up being a net expense (it's currently 9 bips, but offset by 12b-1 fees). Essentially, they are passing on 12b-1 credits and ticket charges to the client. It's all disclosed in the contracts, as well as on the statements. Personally, I wish Jones, as well as all other firms, would make all the fees more consistent and transparent, both to the advisors and the clients. So the fee is the fee is the fee. No "credits" no "offsets" no "ticket charges" or "program charges", no IRA fees, no transfer fees, etc. Make it simple. Here is the fee (say 1.5%) for advice, trading, and monitoring of your account. All inclusive. No haircuts, no other fees. No making it more painful for everyone involved. No more explaining things away. No more deciding between making a transaction or not because of ticket charges, etc. Our freakin industry just can't get it right. Ever.[quote=Spaceman Spiff] Jones doesn’t hit us with a program fee. So, my compensation on advisory business at $250K would be 1.35% @ 40%. Clients get rebated the 12-b1 fees. They’ve got this weird pooling of shareholder accounting fees thing that they do, but basically the clients get those rebated too. None of that affects my compensation. The only time my payout gets affected is if I discount below a certain percentage or if I’m discounting and the account falls below $100K. If those things happen my payout drops to 30%. Consequently, I’m not discounting anything. [/quote]
Au contraire mon frere (Yes I googled the spelling). If you are still presenting the program in that light, I would suggest you do some more reading.
B-
LPL gets it right when it comes to transparency. Your firm, EDJ,is the one whose montra is the client always comes first. That's BS and you, Spiff, et, al, know it. I give you kudos for at least breaking down the costs. Spiff...well let's just say he's a company man. I love that classic comment with EDJ reps...Its the industry. B you do know better!!!Not sure how LPL is any different. They still charge IRA fees, have ticket charges, collect revenue sharing kickbacks and 12b-1’s, etc. Not much difference there. All the same disclosures.
Part of the problem is that too many people have their hand in the cookie jar...fund companies, brokerage firms, advisors, stock exchanges, transfer agents, etc. But I think all of it should be behind the scenes, with the client paying ONE fee on their account, and the advisor earning ONE type of revenue (without hidden expenses like ticket charges, program fees, etc.), without any conflicts of interest (I'm not including insurance business). That way, the only variable is the fee. And it's in black and white. If the B/D's want to lower payout to compensate for their expenses, fine, but the nickel/dime crap adds up, and just complicates the entire process.And incidentally, I’m not trying to defend Jones or knock LPL, I think it’s more of an industry problem (and that’s not coming from “Jones”, that’s based on what I witness from other firms and hear from FA’s).
What you are saying is “it should all be hidden inside one fee.” We’d all like that, but increased disclosure has only created the animal you are describing. You are right, though, that there are way more people getting a slice of a smaller pie than there used to be.
You guys - B24 and Hulk - are of course correct on the shareholder accounting fees. I knew there was a 9bps charge to the account, but mistyped on the shareholder accounting fees. Caffeine wasn't quite engaged yet.
I know, I know, Spiff is too dumb to know what he doesn't know. Drinking the kool aid. Blah Blah Blah.What? You didn't know that LPL is THE PERFECT COMPANY? What rock have you been living under? I'm appalled that you would even utter that kind of blasphemy.Not sure how LPL is any different.
Spiff-
LPL has arrived...at least according to this author. http://www.financial-planning.com/fp_issues/2009_11/weve-arrived-lpl-2664390-1.htmlThe simple fact remains: most of the LPL people that I come across are former Jones people. The size of LPL is now actually larger than Jones in number of advisors although the revenues that Jones produces is much higher. These are the facts. Why did this happen.....there are multiple ways to help clients meet their retirement goals that are legal, ethical and profitable. Jones is one way, LPL is another as is RJ. We must each find which way is best for them.Great. I’m happy for you. You should throw yourself a big party.
[quote=B24]
I heard LPL just built a new FA training center in St. Louis.
[/quote] I am trying hard to be balanced, B24.....