I had a meeting with some clients on Friday morning and was reminded of this thread.  They have over $650K with American Funds today.  The wife is a former EDJ person and they started buying American Funds back in the days when Jones people either bought American or Putnam and that was it.  They asked what they should do with their portfolio in light of what's going on in the markets today.  I had to chuckle at them.  I said, well, I would personally add something inflation protected or that participates in a rising interest rate market...wait, American doesn't have anything like that.  Never mind.  Well then, I'd look at domestic small cap and midcap because they perform really well in a market like this...wait, American doesn't have anything like that either.  Well, then I guess we should just move some more money to CAIBX and go have some lunch. 

I've suggested every year, like I did on Friday, that they add a different fund family to their investment mix instead of continuing to add money to American funds.  Something that looks, act, thinks, and performs better or at least differently than the S&P and the vast majority of their American Funds holdings.  I told them they simply left money on the table because American really didn't handle the downturn as well as I would have assumed they would.  They also left money on the table because the vast majority of their funds are in large cap stocks which haven't made the big turn around like small and mid caps.  So, saving 1% has cost them dearly.  But they're insistent that cost is more important than performance, so we're adding this year's contributions to ANCFX.  Very frustrating. 

You have a choice in the matter, Spff.  Don't work with them.  I have no all American Funds portfolios on the books and will not add any.  I've had prospects ask me to transfer in and service them ... but I can service something I don't belive in.

You don't bring a Dodge to a BMW service station for a tune up. 

I realize I have a choice.  They're nice people, take up very little of my time and even less of my mental energy every year.  They're one of the first couples in my office every year making their Roth contributions.  I make suggestions every time they're in the office about how to improve the portfolio by using a different investment approach, but they, I should be saying he, decide to just keep doing what they've been doing.  I'm not frustrated with them because I bend over backwards for them and they do nothing.  I get frustrated with them because I know I can do better for them if they'll let me.  It's a frustration that lasts for about 3 minutes.  Then I'm done for another year. 

[quote=lovindaindy]

First off I hate AF.

That said, the performance since 2008 is not entirely their fault.  When you are the largest mutual fund familiy, and the majority of your clients are small accounts, the entire middle investor gets spooked with everything selling off, those outflows probably caused the managers to sell some decent positions in order to stay within their prospectus' guidelines. 

Once again though, I agree with SportsFreak and LSUAlum.  Too much overlap, and glorified index funds.

Also, reliance on wholesalers is pretty shitty.  Who cares if they come by?  Do what's right for your clients and the money will flow.

[/quote]

I don't use mutual funds at all, I was just making conversation.  No need to be touchy.   Just seems that if it's a guy's job to cover a sales territory, and the largest wealth management office within a hundred miles has never heard of him, he's not doing much.

I agree with lovin - Wholesalers aren't going to pick up the phone and generate commission dollars for your office. Why would you ever want one to camp in your office for an hour and waste your time? I really don't see the point to wholesalers other than adding exposure to their fund family, and who needs that if you're the largest fund family? What can they tell you that you can't spend 5 minutes reading on their website? They exist to pay for lunches and thank you for their business... which is a gigantic waste of time.

Everyone wets themselves when Am Funds hands out a free highlighter.

I did a lot of shopping around before I chose which financial company I wanted to work with. I chose American Funds because they had amazing customer service. They went out of their way to help me understand their company. What sucks is that everything changed when I became a customer. With in six months the customer services went from great to awful. They really tricked me.

Surprisingly Barron's scored American Funds the #1 fund family for 2010 based on performance over the last decade.  Franklin Temp was #2.

Too big to be nimble.

There was an Evergreen wholesaler who came to our office when I was at SB, and he had a poster of a guy in a suit with a big grin on his face. 

Isn't this the story of most of the American funds? everything is fine until 2008 and then, boom, we notice overlap, no service and others! Incredible!

They might as well change their name to Janus. 

Having to wait 13 months for the trails to pay is total BS, and pretty pompous on AF's part. Until they fix that and pay immediate, I will choose Franklin Templeton.

Lobstar, are you single?

Spaceman Spiff touched on Ed Jones ADVSOL program taking off as factor in the outflows. I'd love to know how much American Funds were cashed in to invest in ADVSOL. I wouldn't be surprised if it weren't half of that 40B figure. I don't think that change was in most client's best interest. I know some was done under the cover of realizing losses, which of course could have been done in the same fund family @ nav

[quote=7point62]

Spaceman Spiff touched on Ed Jones ADVSOL program taking off as factor in the outflows. I'd love to know how much American Funds were cashed in to invest in ADVSOL. I wouldn't be surprised if it weren't half of that 40B figure. I don't think that change was in most client's best interest. I know some was done under the cover of realizing losses, which of course could have been done in the same fund family @ nav

[/quote]

Of course it's not in the client's best interest but that's the Jones model for new advisors: pump 'em into A share  AmFunds so you can get your 5% and eat and then two years later switch over to Advisory to establish your fee based practice. Genius, and the poor suckers in Smalltown, USA don't know the difference.

"Hey Client X...you remember those shitty mutual funds I recommended two years ago? Well, yeah, I'm gonna need you to switch to Advisory. Okay? That'd be great, thanks."

I can say that is not the model for new Jones FAs in my neck of the woods. And in my small town, clients are smarter than you are giving them credit for. I recently had a 7 figure account transfer in due to dissatisfaction from high fees they were being charged in a mutual fund wrap account.

I sure don't know it all but my twenty-plus years experience in this business tells me, if it isn't good for our clients, it isn't good for us.

And on the subject of wholesalers, I came to the conclusion a long time ago that I don't recommend investments because I like a certain organization's representative. I recommend the investments because I like them and think they are appropriate for that client's situation.

But I do miss the American Funds highlighters  :)