Jones Secrets Revealed, Part V

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spikedkoolaid's picture
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The liquidate and transfer form that Jones has clients sign is the biggest form of churning/unethical behavior that Jones covers up.
Let me explain:  Unassuming client brings in a statement to get a "free portfolio review".  The IR suggests that they transfer their account in to EDJ.  Instead of transferring in-kind the T-Rowe Price Int'l Fund, the Calamos Growth fund, the Phoenix Mid-Cap Value fund, the Alliance International Value fund, and the Legg Mason Value Trust.  They say, let's Liquidate and Transfer this $400,000 account and put it into two different fund families. 
I would hope that Jones would start asking the IR where this $400,000 check is coming from and why did the client decide to liquidate and transfer the account.  What funds were the client invested in, etc.  I just wish that the field supervision at Jones would ask more questions of the IR when they get a big check deposited into an account.

CIBforeveryone's picture
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Oh, and when the check arrives in the mail, be sure and wait until Shamrock Saturday to put in the trades because you can win an Edward Jones snow globe from the fixed income department if you generate over $1000 in gross commission if you are Segment 1 or Segment 2!
Then be sure you send a wire to the Regional Leader and let him know you are in working hard! (After you sign in on the class system of course).

FreedomLvr's picture
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Woah Woah Woah!  If I had known they were giving away snow globes...

Broker24's picture
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Whereas, if you are"Indy", you just put them in a fee based account and
collect 1% for life. Much more ethical.

footsoldier's picture
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B24-
What is more ethical? Do what you think is right for the client, or let the client choose their money management fees structure? I thought the same as you until I asked the client what they preferred. I was astounded to find that the client would prefer to pay me more over the long term with the understanding that I could avoid the obvious conflicts that you Jones brokers actually think is better for the client.  
I know you are going to find this hard to believe, but some clients actually prefer fee based. What I find even more interesting is now I don't care which way a client pays me. I let them choose. And some prefer that the inherent conflicts with transactions are not what they want with their financial advisor, so I can accomodate. You will too as more and more clients leave or probably never consider EDJ.
And you will wonder why..

Ilovedogs's picture
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spikedkoolaid wrote:
The liquidate and transfer form that Jones has clients sign is the biggest form of churning/unethical behavior that Jones covers up.
Let me explain:  Unassuming client brings in a statement to get a "free portfolio review".  The IR suggests that they transfer their account in to EDJ.  Instead of transferring in-kind the T-Rowe Price Int'l Fund, the Calamos Growth fund, the Phoenix Mid-Cap Value fund, the Alliance International Value fund, and the Legg Mason Value Trust.  They say, let's Liquidate and Transfer this $400,000 account and put it into two different fund families. 
I would hope that Jones would start asking the IR where this $400,000 check is coming from and why did the client decide to liquidate and transfer the account.  What funds were the client invested in, etc.  I just wish that the field supervision at Jones would ask more questions of the IR when they get a big check deposited into an account.

 
My own RL in NC told us regularly at our meetings that every client had 2 problems: taxation and diversification.  Liquidate and transfer were also readily talked about for new IRs to do like vets.

Ilovedogs's picture
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footsoldier wrote:
B24-
What is more ethical? Do what you think is right for the client, or let the client choose their money management fees structure? I thought the same as you until I asked the client what they preferred. I was astounded to find that the client would prefer to pay me more over the long term with the understanding that I could avoid the obvious conflicts that you Jones brokers actually think is better for the client.  
I know you are going to find this hard to believe, but some clients actually prefer fee based. What I find even more interesting is now I don't care which way a client pays me. I let them choose. And some prefer that the inherent conflicts with transactions are not what they want with their financial advisor, so I can accomodate. You will too as more and more clients leave or probably never consider EDJ.
And you will wonder why..

Footsoldier, I had the same experience when I left EDJ for ML.  Fee based accounts were explained in detail to my former EDJ clients versus the A shares that Jones pushed us new IR's to do.  EVERY SINGLE ONE OF THEM preferred the fee based.  The FA had a vested interest in a client's portfolio performing well and the client knows it.

noggin's picture
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spikedkoolaid wrote:
The liquidate and transfer form that Jones has clients sign is the biggest form of churning/unethical behavior that Jones covers up.
Let me explain:  Unassuming client brings in a statement to get a "free portfolio review".  The IR suggests that they transfer their account in to EDJ.  Instead of transferring in-kind the T-Rowe Price Int'l Fund, the Calamos Growth fund, the Phoenix Mid-Cap Value fund, the Alliance International Value fund, and the Legg Mason Value Trust.  They say, let's Liquidate and Transfer this $400,000 account and put it into two different fund families. 
I would hope that Jones would start asking the IR where this $400,000 check is coming from and why did the client decide to liquidate and transfer the account.  What funds were the client invested in, etc.  I just wish that the field supervision at Jones would ask more questions of the IR when they get a big check deposited into an account.

Spiked- One of my biggest gripes industry wide is what you just talked about..... I try to transfer inkind whenever possible and just do some exchanges if necessary for the client's risk tolerance. I personally like having to sign a switch letter as there is usually a reason that we are moving......not because I want a payday.

Broker24's picture
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Foot, actually, I don't think fee based is bad. I would love to have a better
platform to do it. My only issue is the general suggestion that liquidating
and transferring in order to move a client into investments you believe in,
AND earn a living doing good for your client is somehow wrong or
unethical. I am not going to take on a crappy portfolio and have
responsibility for managing it, AND not make money on it, just because it
is cheaper for the client. As most would agree, cheaper is not always
better.

Here's the thing, though. If a client has a really good MF portfolio (we'll
just talk about MF's for right now), that you can work with, but the client
just wants a better broker, one would instinctively think that you should
try to work with what they have. BUT, is it entirely appropriate for me to
not earn any money for managing that portfolio? You would be getting
1% for life, I would be getting zero (maybe .25% x 40% if it carries a
12b1). On top of that, I now have to follow and track investments that
are not part of my core focus (Indy or not, we all have funds and stocks
we follow and are partial to).

My point is, we all need to get paid for our services. At EDJ, I am not
fortunate enough to have an adequate managed money platform, so I
work it out on commissions (and some MM). I do not have a conflict of
interest, because I utilize the funds I believe in. Do I use the preferred
funds? Sure, about 85% of the time. But I would not even touch 3 of our
preferred families. But I am not going to take on portfolios with dozens
of different fund families, because I do not follow them, I do not believe
in them (because I do not follow them), and I am not going to try because
it takes my eye off the ball. I am not going to apologize for how I manage
money, because it is in the best interest of the client, just as what you do
is ALSO in the best interest of the client. We just have different ways of
doing it. AND, you make more money for doing it than I do.

Here's the thing: if you are good at what you do, are honest with your
client about fees/commissions, and you charge a REASONABLE price for
your services, there is not a conflict of interest under ANY platform, fee
based or commission based. A good, ethical broker will NEVER have a
conflict of interest. I am comfortable with doing the right thing for my
client AND making money doing it. Now, trading securities or moving
among A share families just for the purpose of generating additional
commissions is wrong. BUT, so is collecting 1% if you are not staying on
top of your accounts and just riding an electric cart every afternoon (I am
not suggesting that anyone specific does that - I am just stating that
there are potential conflicts of interest in EVERY model).

Captain's picture
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Broker24 wrote: Whereas, if you are"Indy", you just put them in a fee
based account and
collect 1% for life. Much more ethical.

No offense B24, but hijacking this thread deserves a boot in the nuts.

I'd say take it to another thread for the 1% vs. A-share debate. It's been
covered to death in other places.

Liquidate and transfer documents from EJ will be on the forefront soon I
smell lawsuits (even if I have to initiate it myself) which will turn into class
action lawsuits.

This one will be a loser for EJ. It's a horrible practice, and terrible way for
a compliance department to turn their heads to the mutual fund
replacement issue and churning.

C

footsoldier's picture
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I do not have a conflict of interest, because I utilize the funds I believe in. Do I use the preferred funds? Sure, about 85% of the time.
B24-
You deserve to be paid. Period. You deserve to have all the options the marketplace offers so you can be totally and completely unbiased in your proposals to clients.
You must ask yourself as many of us have, am I in the right place or the right firm that affords me the opportunity to do the right thing always. I was in your camp for many years, but one day I realized I was being manipulated.
The conflicts you have as an agent transcend you when you are an employee. i.e., If you are representing your firm and they admit to conflicts of interest, and you can obviously not do anything about it, then the argument would seem reasonable that you in fact become part of the conflict. 
I felt the same was as you a couple of years ago. Now I can understand the difference and I can empathize with your situation. Don't fool yourself into thinking because you choose, that you are free of the conflict. The Jones box of goodies is extremely limited. And they get paid more through kickbacks than they do from commissions.
You can only be free one way in our industry.
 

spikedkoolaid's picture
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Broker 24 and others-
You are missing the point.  The point is that I would like Edward Jones to require that all transfers be in-kind.  Then if you want to liquidate and move the money into something that you feel you can manage effectively, so be it.  At least then you will have to answer to your field supervisor as to why the change is necessary.
Pretty simple!
This is a HUGE loophole in the supervision of IR's and needs to be corrected.
 

gad12's picture
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I've been at Jones 2 plus years now and I've never even heard of this liquidate and transfer form.  I can tell you it's not something that anyone has ever encouraged me to use.
I understand the conflicts and all that argument (and agree to some degree with both sides) but the question I think is: 
Do you have a responsibility to research every mf that some prospect may have in order to keep the "best" ones?   
In my opinion this sounds like a terrible idea regardless of commission or fee based. (Of which I prefer fees)  
Now, to take into consideration capital gains is a whole different topics.
But say a client has a 500k IRA they are transferring to you.  My opinion (subject to change) is that the best approach is to liquidate and put them in the model you use and believe in and are able to monitor.  You will do yourself and your clients a disservice trying to track 250 or more funds. 
 

spikedkoolaid's picture
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I don't know if this is old news but it was reported on financial-planning.com on January 5,2007.

NASD Fines Four Firms For Not Waiving ChargesThe NASD fined four brokerage firms $850,000 for failing to waive front-end sales charges for customers buying Class A shares
 
The NASD fined four brokerage firms $850,000 for failing to waive front-end sales charges for customers buying Class A shares by not having adequate supervisory systems and procedures in place. In addition, the companies must repay $43.8 million to the overcharged customers.
As far as the remediation is concerned, Edward Jones is paying $25 million, plus interest; RBC Dain Rauscher $6.8 million, plus interest; Royal Alliance $1.6 million, plus interest; and Morgan Stanley $10.4 million, plus interest."Securities firms must learn all of the relevant pricing features of the fund shares they sell and ensure that eligible investors receive all available discounts and sales charge waivers-without exception," said James S. Shorris, NASD executive vice president and head of enforcement.From 2002 to 2004, a number of mutual fund families offered customers who redeemed shares for which they paid a sales charge to use that money to buy Class A shares of a new mutual fund without paying a sales charge. The NASD found that the four brokerages failed to eliminate the front-end sales charge.

spikedkoolaid's picture
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I think this fine explains that there is loopholes in Edward Jones' supervision.  They don't have the technology nor the eyeballs to effectively manage the IR's who are abusing the "Liquidate and Transfer" form.  Please start using the ACAT and transfer in kind!

footsoldier's picture
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Spiked-
How else will the Jones reps get paid?

noggin's picture
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spikedkoolaid wrote:I think this fine explains that there is loopholes in Edward Jones' supervision.  They don't have the technology nor the eyeballs to effectively manage the IR's who are abusing the "Liquidate and Transfer" form.  Please start using the ACAT and transfer in kind!
I agree with you, Spiked...

AllREIT's picture
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Broker24 wrote: I am not going to take on a crappy portfolio and have
responsibility for managing it, AND not make money on it, just because it
is cheaper for the client. As most would agree, cheaper is not always
better.

That's why they pay you the big bucks. Just adopt a policy that
transfered in accounts go to a fee based platform. EDJ is holding onto
an obsolete business model.
Quote: Here's the thing, though. If a client has a really good MF portfolio (we'll
just talk about MF's for right now), that you can work with, but the client 
just wants a better broker, one would instinctively think that you should
try to work with what they have.

BUT, is it entirely appropriate for me to
not earn any money for managing that portfolio? You would be getting
1% for life, I would be getting zero (maybe .25% x 40% if it carries a
12b1). On top of that, I now have to follow and track investments that
are not part of my core focus (Indy or not, we all have funds and stocks
we follow and are partial to).

Funds are funds, you are not working in the best interests of the clients
if you run their money through the deli slicer again. How you get paid
and the best interests of the clients are two different things.
Quote:My point is, we all need to get paid for our services. At EDJ, I am not
fortunate enough to have an adequate managed money platform, so I
work it out on commissions (and some MM). I do not have a conflict of
interest, because I utilize the funds I believe in. Do I use the preferred
funds? Sure, about 85% of the time. But I would not even touch 3 of our
preferred families.

Just because you say you don't have a conflict, doesn't mean that there isn't one.

You take clients out of old funds, often already paid for, to put them
into new funds (thus earning fresh commisions).  Some of those new
funds even give you an extra kickback. In fact you transfer clients to
funds that give you a kickback 85% of the time.

Do you see how this looks to everyone else outside of EDJ?

The core problem is that the transactional model is not suited to long
term investment of money. I like EDJ and thier business system, but I
think the A-share model is obsolete and it is holding the company as a
whole back.

Quote:But I am not going to take on portfolios with dozens
of different fund families, because I do not follow them, I do not believe
in them (because I do not follow them), and I am not going to try because
it takes my eye off the ball.

Selling A shares?

Quote:I am not going to apologize for how I manage
money, because it is in the best interest of the client, just as what you do
is ALSO in the best interest of the client. We just have different ways of
doing it. AND, you make more money for doing it than I do.
How can more than one thing be in the "best" interests of the clients?

Quote:A good, ethical broker will NEVER have a
conflict of interest.

Sure they will, they will be presented with many conflicts of interest.

However the choice to take advantage of the situation is up to broker and his sense of ethics.

Quote:Now, trading securities or moving
among A share families just for the purpose of generating additional
commissions is wrong. BUT, so is collecting 1% if you are not staying on
top of your accounts and just riding an electric cart every afternoon (I am
not suggesting that anyone specific does that - I am just stating that
there are potential conflicts of interest in EVERY model).

LOL, clients pay me 1% so that I won't trade the account as much as they would, if left to themselves.

Someone once asked Seth Klarman about the fact that his fund was 45% in
cash during 1999. He said that he gets paid to act in the best
interests of the clients money, not to invest it. Smart man that
Klarman.

AllREIT's picture
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gad12 wrote:Do you have a responsibility to research every mf
that some prospect may have in order to keep the "best" ones?
 

If you are a doctor, do you not have a responsibility to know about
every disease that some prospect may have in order to make the
"best" diagnosis?
 
Ditto for a lawyer or accountant or anything else. I expect my plumber to know everything about the plumbing in my house

How long does it take to pull up a morningstar/S&P report on the
funds in someone's portfolio? You are going to have more credibility if
you come to praise ceasar than if you bury him.

Quote:But say a client has a 500k IRA they are
transferring to you.  My opinion (subject to change) is that the
best approach is to liquidate and put them in the model you use
and believe in and are able to monitor.  You will do yourself and
your clients a disservice trying to track 250 or more
funds.

Not really. What you do is asset allocation, Mutual funds are means
to an end, not an end in themselves. You keep what fits into your new
plan, and discard what does not.

But to trade Coke for Pepsi, just cause Pepsi gives you 3%
commision  is not in the best interests of the client. If someone
has $40K in Pimco real return, you arent doing them any good to shift
it Bond fund of America.

The Truth's picture
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Transferring in kind would never reduce the amount of switches.
Compliance is pretty much kept under control as long as preferred funds are
used.

gad12's picture
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ALLREIT -
I hate the "A" share system as much as anyone currently at Jones.  And when my 3 yrs are up will be out of here for that and many reasons.  And as noted above I've never even heard of this form they are talking about. 
However, your analogy apears flawed in my opion.  The disease is the customer's financial situation not the mf's.  As a doctor I am going to recommend the best way I know how to fix the problem I diagnose.  Under most circumstances I will not continue treatment in the methods prescribed by other doctors although I may consider them.  If I do that I will soon have hundreds of solutions and be responsible for them.  Sure I can look on morningstar for 10 minutes to check out a fund.  But try doing that for hundreds of funds every quarter.  That is going to take a lot of time.  You can't assume all those funds will be great indefinitely it takes constant effort and lots of it.  And the dilema at Jones is even worse if it is a no load with zero compensation. 
Even when I get to a fee based model (ASAP)  I will still try to limit the number of funds my clients hold as much as I can within the individual situations. 

Broker24's picture
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Bottom line is, I am not condemning fee based at all. As I said, I would
love to do more of it. Look at it this way; in fee based, you get a client's
portfolio to move over in kind. You don't like their stuff, it's not part of
your model, so you move it around and shape it how you want. No big
deal since you are just charging 1% for whatever you do. What you are
trying to tell me, is that since I get a "commission" of say, 2.5% once
upfront, and I want to rebalance to my model, that I am somehow doing
something wrong (and stop saying we also charge 150BP in expenses - I
have never used a MFD that charges close to that). In fee based, you are
making FAR more than on commission, for the SAME work. So don't
condemn me for charging for my services, when the whole reason you are
doing it is to bash Jones. I would LOVE to get 1% on all my assets. It's a
GREAT reason to bash Jones. I WANT TO MAKE MORE MONEY! Say it
louder!

One of the things I have not said previously is that there are plenty of
times I leave clients in what they already have. If I am happy with the
fund family choices, or with the funds they are holding, I will leave them.
Even if it means no payout. Maybe I don't need to do anything for them,
so I am not really concerned about the payout. Do some people move
them out just to make commission? Damn straight. And it happens in
every firm, not just Jones. Just like in fee based you have plenty of 1%
accounts that you do NOTHING for. We all live in glass houses.

I can't wait for a better fee based platform. I should be able to give
clients more choices. I have lost some prospects that do not like the
commission model. I am giving Jones 3 more years to come up with
something acceptable (that is when my book will be where I want it).

noggin's picture
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The Truth wrote:Transferring in kind would never reduce the amount of switches. Compliance is pretty much kept under control as long as preferred funds are used.
It wouldn't reduce the amount of switches but they would be visible......rather than invisible.

footsoldier's picture
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Compliance is pretty much kept under control as long as preferred funds are used.
 
I agree with Spiked on this one. Compliance reports directly to management and not the regulators so clearly a conflict is apparent even at the top level. Self regulation at least at EDJ is a farce. They are employess also and do what they are told.
 

anonymous's picture
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Always remember that compliance works for whomever signs their check.  They are not there to protect the consumer and certainly not to protect the rep.

troll's picture
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anonymous wrote:Always remember that compliance works for whomever signs their check.  They are not there to protect the consumer and certainly not to protect the rep.They are there to protect the GP's, but still they will also face a conflict when they say 'no' to a revenue-generating transaction right?

The Truth's picture
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The problem is you cannot expect "compliance" to take a stance when you
are paying people $40K per year. Put yourself in their shoes. Would you
take on a big producer/GP at Jones when you are barely able to make ends
meet? No way and that is why nothing is ever done.

Ilovedogs's picture
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gad12 wrote:
I've been at Jones 2 plus years now and I've never even heard of this liquidate and transfer form.  I can tell you it's not something that anyone has ever encouraged me to use.  IT'S CALLED AN ACAT FORM, GENIUS!
Do you have a responsibility to research every mf that some prospect may have in order to keep the "best" ones?   UH, YEAH!  YOU ARE RESPONSIBLE TO "KNOW YOUR CLIENT."  IF SOMEONE HAD THE DODGE & COX STOCK FUND, YOU WOULD TELL THEM TO SELL?????  YOU ARE PERFECT FOR EDJ! 
In my opinion this sounds like a terrible idea regardless of commission or fee based. (Of which I prefer fees)  
 
 

gad12's picture
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Hey dogs why don't you read the initial post over again.  They are not talking about a normal ACAT transfer.  Who's the GENIUS?
And if you'd read my other post above you'd notice I said I occasionally will keep a fund, but as a general rule I do not.  I do not want to waste all of my time monitoring hundreds of funds that will indefinitely pile up if I keep every good fund that every client transfers in.  Keeping up with manager changes and knowing when funds are not worth holding anymore would be a huge time burden and would bog down your time from more important things.
 

Starka's picture
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With all due respect gad, what's more important than your clients' financial
well being?

AllREIT's picture
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The Truth wrote:The problem is you cannot expect "compliance" to take a stance when you
are paying people $40K per year. Put yourself in their shoes. Would you
take on a big producer/GP at Jones when you are barely able to make ends
meet? No way and that is why nothing is ever done.

It's also a cultural matter in sales driven organizations. The top
sales people are gods, and basicly untouchable. In other companies that
care about compliance and ethics, thats not so much the case.

A good analogy is Ford with Pinto. They (Ford management) figured the
cost of wrongful death lawsuits is so much per car, and that was going
to be less than the cost of covering the gas tank with a rubber sheet.

EDJ to RIA's picture
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From my memory, the "liquidate and transfer" form IS the ACAT form. You just check the "liquidate" box instead of the "in-kind" box. It's the same with my current custodian, though now I have no incentive to check "liquidate".
On another note, I always found the time issue to be a huge conflict of interest with Jones.
I was also in the same region as Ilovedogs in NC. The RL mentioned  had north of 3000 accounts. Let's say that's 1500 households. If you wanted to have an annual review with each HH once a year, you'd have to do 6.25 appt's each day.
Also, if you have some "core" holdings that are used accross the board and a change needed to be made, how do you decide who gets the update first? There was no system in place at Jones to make global changes to portfolios like I have in the independent world.
Just a couple of issues I had at Jones...

babbling looney's picture
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gad12 wrote:
Hey dogs why don't you read the initial post over again.  They are not talking about a normal ACAT transfer.  Who's the GENIUS?
And if you'd read my other post above you'd notice I said I occasionally will keep a fund, but as a general rule I do not.  I do not want to waste all of my time monitoring hundreds of funds that will indefinitely pile up if I keep every good fund that every client transfers in.  Keeping up with manager changes and knowing when funds are not worth holding anymore would be a huge time burden and would bog down your time from more important things.
 

Umm Yeah....It's all about you and your convenience.  Not about the client and whether the funds they currently own are better than the preferred funds.  Who wants to actually learn about investments.  Much easier to swallow the pablum that Jones gives you.
By the way......the reason that Jones wants you to sell the preferreds (besides the kick back, oops I mean revenue sharing) is that they send the prospectus for funds you sell to the client with the confirmation.  They don't want to have to have a huge stock of odd ball prospectuses.  It's much easier to have a large inventory of the preferreds on the shelf than to have to scrounge around for that Oppenheimer Small Cap International Fund you happened to sell.  (I already know it has a minimum so don't go there )
Just not cost effective to have you sell off the wall funds from their clerical perspective.

spikedkoolaid's picture
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Babbling,
Great comment, accept Oppenheimer is now a preferred.  They are loading up on the perspectives back in St. Louis.
Just a thought,  Maybe people are clueing in on the Fortune 100 best companies to work for.  They dropped from the Top 10 to Number 29.  Maybe next year they will drop out of the top 100 altogther.  I love the turnover rate, 14%.  That must mean that the IR is 45% turnover and the back office and Sales Assistant (BOA) is 5-8%.

Ilovedogs's picture
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gad12 wrote:
Hey dogs why don't you read the initial post over again.  They are not talking about a normal ACAT transfer.  Who's the GENIUS?
And if you'd read my other post above you'd notice I said I occasionally will keep a fund, but as a general rule I do not.  I do not want to waste all of my time monitoring hundreds of funds that will indefinitely pile up if I keep every good fund that every client transfers in.  Keeping up with manager changes and knowing when funds are not worth holding anymore would be a huge time burden and would bog down your time from more important things.

Gad (what a name), you said there wasn't a form.  You can either ACAT and LIDUIDATE everything after TRANSFERRING which requires the ACAT form or LIQUIDATE at the holding firm.  You still have to use an ACAT to get the funds or have the firm send a check. 

blarmston's picture
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Great comment, accept Oppenheimer is now a preferred.  They are loading up on the perspectives back in St. Louis.
Thats what they're called now? Funny- I thought they were called prospectuses...

spikedkoolaid's picture
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Sorry Blarmston.
I was thinking about the Investment Perspective that I use to pay $250/month to send out to clients and prospects when I was at Jones.  I mistyped!

AllREIT's picture
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Joined: 2006-12-16

Starka wrote:With all due respect gad, what's more important than your clients' financial
well being? Getting Paid and getting laid? If Gad12 wants to do the right thing for clients (research their portfolio's, do the minimum trading necessary to rebalance, place them in the lowest cost/best performing funds): At EDJ he won't eat.On the other hand if does what EDJ wants, (Churn the account into EDJ preferred funds, don't waste time that isn't earning you money, don't do anything personal that adds value), he will do ok, and have a bright future. Let's face it, if spending an hour doing  portfolio analysis precludes you from making $4000 in commisions, you aren't going to spend time doing that. Most customers trust you to make sound recomendations, EDJ's A share business model forces a conflict between what is best for the adviser and what is best for clients. There is no way to get around this, even if you claim to act in the best interests of clients. And just to get a sense of how much depends on kickbacks from preferred funds:Quote:For the year ended Dec. 31, 2005, Edward
Jones received approximately $172 million in revenue sharing payments
from the preferred fund families as designated throughout 2005.
For that same period, Edward Jones' net income was $330 million. http://www.edwardjones.com/cgi/getHTML.cgi?page=/USA/product s/mutualfunds_revenue_sharing.html Say hello to Edward Jones.

AllREIT's picture
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Joined: 2006-12-16

EDJ to RIA wrote:Also, if you have some "core" holdings that are used accross the board and a change needed to be made, how do you decide who gets the update first? There was no system in place at Jones to make global changes to portfolios like I have in the independent world.This is so important if you add value by picking stocks for people, (i.e you are adding value), After the big REIT runup this year, it was very easy to just call up a select list of clients, tell them I recommend liquidating their positions, and then doing that all in one sweep.Another aspect which is dumb at EDJ, is the lack of an online trading platform for clients. Stoopid, because alot of people like to play the markets, and that is ok in the context of a complete plan.

spikedkoolaid's picture
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Joined: 2006-04-20

AllReit-
I actually disagree with you regarding online trading for clients.  I would rather they "play" the markets at some other firm.  I really like managing their serious money.  I think Jones is correct in keeping the IR protected.
The one thing of many I disagree with is their use of the Liquidate and Transfer Form.

AllREIT's picture
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spikedkoolaid wrote:I actually disagree with you regarding online trading for clients.  I would rather they "play" the markets at some other firm.  I really like managing their serious money.  I think Jones is correct in keeping the IR protected.
What I'm talking is someone having a taxable account for online trading, not for letting people trade online in IRA's and suchlike.
For example, Vangaurd charges $35 for online trades via their online brokerage system. That makes it wholly unsuitable for any sort of rapid trading, but allows people to manage stocks as needed.
It's a relatively minor issue all in. The much bigger problem is as discussed, the complete lack of will about moving the compnay to a fee based platform and away from a transactional model.
This would also ween the company from all those fund kickbacks (which to be honest shouldn't be legal).

AllREIT's picture
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Joined: 2006-12-16

Did anyone see the EDJ ad, in this weeks TIME magazine? Any thoughts?

spikedkoolaid's picture
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Joined: 2006-04-20

I didn't see the ad in the magazine but I don't think that the Top Producers should be giving up 1% of their commissions for the National Advertising Campaign.  If you take an EDJ top producer producing 500,000 to 1000000 they are paying $5000 to $10000 to fund the national advertising campaign.  They are sacrificing "for the good of the firm".  They don't even get to write this off their taxes.  Hello AMT!

AllREIT's picture
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spikedkoolaid wrote:I didn't see the ad in the magazine but I don't
think that the Top Producers should be giving up 1% of their
commissions for the National Advertising Campaign.  If you take an
EDJ top producer producing 500,000 to 1000000 they are paying $5000 to
$10000 to fund the national advertising campaign.  They are
sacrificing "for the good of the firm".  They don't even get to
write this off their taxes.  Hello AMT!

Wouldn't top producers be involved in the LP? If so they should
willingly contribute to things that improve the productivity of
non-competative EDJ'ers, thus giving more profits to the LP.

spikedkoolaid's picture
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Joined: 2006-04-20

Well if you look at it that way, you are probably right on.  I just hated paying that 1% to IR's who were failing miserably.

gad12's picture
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Joined: 2006-12-06

Not backing Jones or the policy, but since it is taken out prior to the producer receiving the income then ultimately it is not taxed and makes no difference that they can't deduct it. 

gad12's picture
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Joined: 2006-12-06

At least I assume it would be taken out pretax, being that it would be stupid to take it out after taxes and I can see no reason Jones would want to do it that way.

Broker24's picture
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Joined: 2006-10-12

FYI everyone, that 1% National Sales/Ads fee at EDJ is is capped at $250/month, regardless of how much you produce.  The MOST you pay is $3,000/yr.  So a $20K/mo. producer is paying $200/mo. 
Also, it is taken out of pre-tax commissions, not post-tax.
Anyone can argue the merits of National Advertising.  Bottom line is that it is there, and it does not amount to much.

AllREIT's picture
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Joined: 2006-12-16

Broker24 wrote:Anyone can argue the merits of National Advertising.  Bottom line is that it is there, and it does not amount to much.

So what do you think of the Ad campaign? I thought the ad in time was
quite good, although the text was a bit hard and small to read.

National advertising is important for building mindshare, but I wonder
how many people actually read the ads. It might also make sense for EDJ
to advertise in slightly wealthier magazines like National Review or
Harper's

troll's picture
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Joined: 2004-11-29

AllREIT wrote:
Broker24 wrote:Anyone can argue the merits of National Advertising.  Bottom line is that it is there, and it does not amount to much.

So what do you think of the Ad campaign? I thought the ad in time was
quite good, although the text was a bit hard and small to read.

National advertising is important for building mindshare, but I wonder
how many people actually read the ads. It might also make sense for EDJ
to advertise in slightly wealthier magazines like National Review or
Harper's
The typical Jones client is too stupid and too poor to read National Review and Harper's. If they want to reach their target client they should take out full-page ads in the National Enquirer.

footsoldier's picture
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Joined: 2006-04-30

So. If I could expand your mental horizons a bit Mr. B24 and other Jones folks. You are an employee, and your employer is making you pay up to 3K for those great ads (some of them are hilarious), aka national branding.  Do you benefit from them?
Hard to quantify, but for the sake of argument, people get a good impression and  come by and buy a bond, or request a mutual fund. And when you sell them something, you get roughly 40 (after expenses) of the revenue. Which means the owners keep 60%. And if you are selling a mutual fund, the likelihood it isn't a rebating fund to the owners is less than 5%. And the owners benefit again.
So to summarize the owners make you pay for the advertising, keep more than half of the revenue you generate, and then make more through the back door. What a great deal for the owners!
Maybe some Jones IR's can make the case why the national ads are worth paying for. I just don't get it. And I was there for almost ten years....
Lets see , $250 a month for ten years at 8% is $45,000. Ouch.
 

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