Spiff, I hope you bought those timeshares online. Never pay retail for a timeshare.

Spiffy-

Great call. The trips are THE only thing my wife misses about EDJ. I ididn't really care but because she did, I went out of my way to have the best trip ever two years ago. For me, it felt better knowing I could provide the same experience. No doubt I paid more for the trip. It cost me 12K (took 4 friends and family at my expense) and it illustrated that when we are profitable I need to share it with those that took the leap of faith with me to the dark side. One problem that is consistent no matter where you hang your hat...Once they get used to the great treatment, they expect it year after year.

Kudo's to you for not caving into the trip nonsense and do what is right for the client. Jones should just have a revenue goal  and let the reps do their job. I never understood why Credit Cards were important to the bottom line...

[quote=Spaceman Spiff]

I have and never will sell anyone a stock, bond, mutual fund, credit card, or insurance product because of a trip.  I actually missed my last trip because I needed 500 more points in the income non taxable category.  I had a guy with $50K going into his JT account the day before the contest ended.  His tax bracket wasn't high enough for me to justify putting it into a muni bond or muni fund.  We bought BABs instead.  It was the right thing to do for him.  It saved me $1500 in taxes, but cost me a trip.   

[/quote] You have been braggin about these for a while. Must be a lot of lower tax bracket guys walking thru the door lately huh?

I remember how my RL "coached" me on various ways to qualify for trips. I liked the trips in full disclosure but looking back they sure do have conflicts inherent in them if you aren't careful those last few days of a contest. My wife says the trips were the best thing at Jones and I mean diversification trips and not the regional "team buliding" meetings.....

[quote=N.D.]

[quote=Spaceman Spiff]

I have and never will sell anyone a stock, bond, mutual fund, credit card, or insurance product because of a trip.  I actually missed my last trip because I needed 500 more points in the income non taxable category.  I had a guy with $50K going into his JT account the day before the contest ended.  His tax bracket wasn't high enough for me to justify putting it into a muni bond or muni fund.  We bought BABs instead.  It was the right thing to do for him.  It saved me $1500 in taxes, but cost me a trip.   

[/quote] You have been braggin about these for a while. Must be a lot of lower tax bracket guys walking thru the door lately huh?

[/quote]

Two reasons for the BABs.  One, I can put them in IRAs which opens them up to a lot of people who otherwise wouldn't be shopping for municpal bonds.  So now I not only have corporate bonds and bond funds to utilize, but I've also got munis.  Just another diversification tool.  Two, while I do have my share of muni buyers, with rates where they are, 7% on a BAB sounds great whether you need tax free income or not.  They're great conversation starters. 

[quote=navet]

Spiff, I hope you bought those timeshares online. Never pay retail for a timeshare.

[/quote]

I bought those timeshares when I was much younger and much more, um, dumb.  Now I hold onto them because friends like to rent them from us and use the weeks for vacation.  But you're correct, if you want to buy a timeshare, buy it in the secondary market, not from the resort. 

Wow, I take a week off, and a good ole' Jones-Indy shootin' match starts.  Nice!

A few comments...

* Thanks Locked for your candid comments on indy vs. Jones.  I think you're like the ONLY guy I have seen that has been even marginally honest about the challenge of going indy and the true costs.  I think at larger asset/production levels, the cost/income issues are far more tilted in your favor (indy), so keep plugging along.

* The Jones Regionals are really just mini-diversification trips for those that don't qualify.  And as we all know, the sole purpose of the D-Trips is to entice you to stay.  They suck your spouse into the Jones culture, and make it very difficult to consider leaving.  It seems half the veterans I talk to, that's all they talk about (D-Trips).  Seriously?  I mean, they are wonderful, no doubt, and most of us would not go through as much as Jones goes through to cover all the little details, but in reality much of it is overkill.  And the Regionals are meant to do the same thing, just on a smaller scale.  That's why the content is often lousy.

* My buddy went to Cambridge like 18 months ago.  He's a small producer (maybe 100-125K at this point?), and his payout is about 65%.  Not sure if that included the tech fee or not.  He works out of his house, so his net is probably like 55-60% (5-10% for overhead).  If he had an office, it would probably be 30-35%.  This is where larger numbers matter if going indy.  However, msot of the folks I have talked to have been able to gether assets FASTER since they left Jones, so if you can finance the move, it will likely be worth it to leave sooner than later.  If you can also do some financial planning for a fee, that could add a few thousand per month NET to your income.  I know guys that have gone indy with 5-10mm and made it work.

* It seems that 35-60mm AUM is sort of the "sweetspot" for an indy if you just want a basic office and maybe one assistant.  Beyond that, you might need to add more staff.  Obviously depends on your client base, avg account, and services offered.

* Jones will never change the LP structure.  Partnerships (in all professions) generally don't "give away" partnership shares.  Dilutes the other owners with no capital infusion to grow the business.  So unless there is some REAL value to the firm in issuing partnership shares, there's no point. 

* Weddle is taking Jones in the right direction.  He is very forward thinking and is quickly making Jones and the infrastructure "relevant" again.  I am guessing there is going to be a lot more to come in the next 3 years.  They are slowly trying to swim upstream, and you can see that with some of their commentary.  They are positioning themselves well for pending legislation on our industry.

* Jones is creating a much bigger divide between the "haves" and the "have-nots" at our firm.  If you are a big producer, transfer broker, or got a big office/Goodknight, you are a "have".  They are making it much more difficult for scratch starters to make it ("have-not").  This will become a double-edged sword for them.  How they manage the new standards and aggressive growth at the same time will be challenging. 

B24- You can't really be serious about the mini diversification trip right?

I do however agree with you about the divide between the have's and have not. Well put. However I also disagree with your assessment that this divide will somehow spit the firm out on the other side in better standing. I think it is a short sided view that hurts our only chance at real growth and that is the new FA in a town gathering up assets. Kill that and you kill "real" growth.

I've never viewed the regional as a mini diversification trip.  Neither has my wife and she's attended both.  It's especially not a mini div trip with the two day format. 

I agree with RW on the new FA gathering up assets in town.  Once a vet FA gets to a comfort zone, he's not going to be as hungry about gathering assets any longer.  Those new FAs gather assets a lot quicker than most vets.  They're the bread and butter of the firm. 

I don't get the impression that Weddle wants to abandon the growth focus through new FAs. I do get the impression that he's finally figured out that if you can get a middle of the road Seg 3 guy to do Seg 4 numbers, the firm makes money. 

B24 ... thanks for the props. I'm one of the ones that left with a trail under $200K,with lesser AUMs.

I've said this numerous times: look at the slope of your sales line. Unless it's definitively and doggedly upward sloping, you will get killed out here. But if you are doing the work, what's the difference if you do it for yourself or someone else?

OTOH, I know guys do $20K a month at Jones (for the last 3-5 years) couldn't make the jump. It's not about expenses, because they can be fixed. It's about production, and sloping upward.

Hey, WTH do I know? I've only been at this independent thing for 3 months and giving financial advice for 3+ years. Only this: in the three months I've been independent, I managed to go out and find money enough to pay off all my considerable debts developed working at Jones for three years. In 90 days.

Color me: wish I did it sooner, but satisfied I fulfilled my contract.

[quote=RealWorld]

B24- You can't really be serious about the mini diversification trip right?

I do however agree with you about the divide between the have's and have not. Well put. However I also disagree with your assessment that this divide will somehow spit the firm out on the other side in better standing. I think it is a short sided view that hurts our only chance at real growth and that is the new FA in a town gathering up assets. Kill that and you kill "real" growth.

[/quote]

Actually, I am serious.  And I did not mean that I viewed them this way (Regionals).  Jones views them this way,  Out of the mouth of a GP.  I think they stink, but Jones thinks it sucks the new guys and the rookie spouses in just enough for them to want more.

As far as the other comment, I only think the firm will come out better if Weddle can truly execute this strategy.  I think they are banking on Goodknight and Legacy Plans, Transfer Brokers, and raising the bar on existing advisors.  Yes, they will continue to recruit newbies, but if you actually put real numbers to it, the number of new/new's recruited that ultimately make it and produce well are a vast minority, but represent the vast majority of the new brokers in terms of total numbers recruited (if that makes sense).  In 2009, they added 4000 new brokers - 1000 trainees left (pre can-sell), and 2200 licensed FA's left, for a net of like 800 more FA's for the year.  But to get 4000 new FA's, they get like 140,000 inquiries and 60,000 applicants.  In reality, almost ALL of the 800 that are left as new for the year were either transfer brokers, joined a Goodknight or Legacy Plan, or took over an existing office.  I am sure the numbers exist, but I would guess that less than 100 new/new's (with no GK/Legacy/Transfer/takeover office) make it each year (they may make it for a few years, but ultimately fail out or leave).  Again, the have's and the have-not's.

B24- So are you saying that Weddle recognizes that new / new isn't really the bread and butter of the firm?

I have thought about this often and wondered if they realize all this and don't care as long as the AUM of the firm goes up.

[quote=B24]

Wow, I take a week off, and a good ole' Jones-Indy shootin' match starts.  Nice!

A few comments...

* Thanks Locked for your candid comments on indy vs. Jones.  I think you're like the ONLY guy I have seen that has been even marginally honest about the challenge of going indy and the true costs.  I think at larger asset/production levels, the cost/income issues are far more tilted in your favor (indy), so keep plugging along.

* The Jones Regionals are really just mini-diversification trips for those that don't qualify.  And as we all know, the sole purpose of the D-Trips is to entice you to stay.  They suck your spouse into the Jones culture, and make it very difficult to consider leaving.  It seems half the veterans I talk to, that's all they talk about (D-Trips).  Seriously?  I mean, they are wonderful, no doubt, and most of us would not go through as much as Jones goes through to cover all the little details, but in reality much of it is overkill.  And the Regionals are meant to do the same thing, just on a smaller scale.  That's why the content is often lousy.

* My buddy went to Cambridge like 18 months ago.  He's a small producer (maybe 100-125K at this point?), and his payout is about 65%.  Not sure if that included the tech fee or not.  He works out of his house, so his net is probably like 55-60% (5-10% for overhead).  If he had an office, it would probably be 30-35%.  This is where larger numbers matter if going indy.  However, msot of the folks I have talked to have been able to gether assets FASTER since they left Jones, so if you can finance the move, it will likely be worth it to leave sooner than later.  If you can also do some financial planning for a fee, that could add a few thousand per month NET to your income.  I know guys that have gone indy with 5-10mm and made it work.

* It seems that 35-60mm AUM is sort of the "sweetspot" for an indy if you just want a basic office and maybe one assistant.  Beyond that, you might need to add more staff.  Obviously depends on your client base, avg account, and services offered.

* Jones will never change the LP structure.  Partnerships (in all professions) generally don't "give away" partnership shares.  Dilutes the other owners with no capital infusion to grow the business.  So unless there is some REAL value to the firm in issuing partnership shares, there's no point. 

* Weddle is taking Jones in the right direction.  He is very forward thinking and is quickly making Jones and the infrastructure "relevant" again.  I am guessing there is going to be a lot more to come in the next 3 years.  They are slowly trying to swim upstream, and you can see that with some of their commentary.  They are positioning themselves well for pending legislation on our industry.

* Jones is creating a much bigger divide between the "haves" and the "have-nots" at our firm.  If you are a big producer, transfer broker, or got a big office/Goodknight, you are a "have".  They are making it much more difficult for scratch starters to make it ("have-not").  This will become a double-edged sword for them.  How they manage the new standards and aggressive growth at the same time will be challenging. 

[/quote]

Why and how do you feel that they are making it much more difficult for scratch starters to make it? I thought they were trying to do away with the new/new philosophy.

To RW and Golf,

Couple of things:

Yes, I think Weddle realizes that in this day and age, you cannot plaster the frontier with untrained newbies starting from scratch and expect them to develop into seg 3/4 brokers very quickly.  In the transactional days of the 80's and 90's, you could do that.  You did all commission stock/bond/fund biz, you had no DNC list, no online brokers (for the most part), and no internet to educate the consumer.  Today, consumers are MUCH more educated and savvy (or more to the point, they are more skeptical of "advisors").  So it's not as easy to pound out calls and sell stocks and bonds over the phone in Jones' model.  On top of that, the media pounds the "fee-only" principle into consumers heads these days, so you also have that to contend with.  It doesn't make business any "worse", it just makes the process longer.  If you have a book of 250-500 clients already, you have a ready-made prospecting list to ad products to, to convert to fees, to mine new assets, whatever.  That's why transfer brokers and Goodknight Plans are so effective at our firm (or any firm).  Between those two concepts, in addition to newbies taking over existing offices, the cost to getting someone up and running is lower, and you churn through fewer recruits to get there.  There's also fewer resources allocated to recruiting and training.

On top of all that, they are raising the standards to push out under-performers.  As I look at the perfromance chart in my region, it is quite evident that the new/new's struggle far more than any other segment of broker, until you get to about 10 years in the biz.  The problem is that the burnout factor is much greater.  As a new/new you have to scratch and claw for every new dollar for the first 5 years at least.  When you have an existing book or take over existing assets, there is lots of untapped potential in the books to mine (not always, but often).

In addition, at Jones they make it virtually impossible for newbies to build a fee-based business because of the commission hurdles.  Personally, I have added $3.5mm in Advisory in 6 months (about 6 NEW households), and it has killed my production.  That is probably 70-80K in production that is non-existant over the last 6 months.  Yes, I will make up for it in the long-run, but it really kiils my production screen in the short-term.  And Jones does NOT care.  My opinion is that they want to newbies to pound out production while they last, and then absorb assets that are left over when they fail out, or get converted to some sort of fee program if the legislation goes as is anticipated. 

Your last sentence has a lot of truth in it.  I think that was spelled out pretty well by Weddle in his response to a question in this week's suggbox.  He said they supported the Dodd-Frank financial reform bill.  That one caught me a little by suprise.  I'm still not quite sure what to make of it, but it does make me think that Weddle, et al wouldn't be terribly disappointed if legislation got passed that said everything had to be fee based. 

I don't think the bill says that everything has to be fee-based, just that there would be a Fiduciary Standard on all transactions/accounts.  It would be a great excuse for firms to convert transactional clients to fee-based managed programs, however (and avoid FINRA challenges on the swap).

The next 24 months will be quite interesting in our industry.

If we were pushed into a 100% fee based world, (don't think that will happen) it would have a big effect on the EDJ business model. It would also have a big effect on all of the broker dealer's business models. I think in a fee only world, that we would see the organic growth model at Jones killed or at the very least curtailed. If those new FA's are not generating commissions, it would take a long time for the fees collected to pay for their training, new offices, etc....    I do think we will have an interesting 24 months ahead of us, and I for one would be happy to see some changes in the Jones model, such as focusing more on the FA's in the field and less emphasis on growing the number of FA's. More emphasis on the quality rather than the quantity of FA's. We are seeing that now to some extent with the higher production standards. I also think at some point we could see a consolidation of Jones offices to lower our expenses and make us more profitable.

[quote=Advisor238]

If we were pushed into a 100% fee based world, (don't think that will happen) it would have a big effect on the EDJ business model. It would also have a big effect on all of the broker dealer's business models. I think in a fee only world, that we would see the organic growth model at Jones killed or at the very least curtailed. If those new FA's are not generating commissions, it would take a long time for the fees collected to pay for their training, new offices, etc....    I do think we will have an interesting 24 months ahead of us, and I for one would be happy to see some changes in the Jones model, such as focusing more on the FA's in the field and less emphasis on growing the number of FA's. More emphasis on the quality rather than the quantity of FA's. We are seeing that now to some extent with the higher production standards. I also think at some point we could see a consolidation of Jones offices to lower our expenses and make us more profitable.

[/quote]

For compliance reasons, you will not see office consolidation.  The only way we get away with no onsite OSJ is due to the one-man setup.  As much as   woudl like to see it, it ain't gonna happen.  However, there is a greater emphasis on Goodknight and Legacy setups, so they may consider extending the time period one spends with another broker, which would get the new broker closer to profitable before building a new office.

If we do move primarily to fees, Jones would just change theri focus for new hires to an asset-based goal rather than commission-based goal like some of the wires (for the early years), and extending the salary.  Actually, this would be far more profitable for Jones, as any assets left behind by failed brokers would at least be productive assets (fee-based).

I think they're already anticipating the move to more asset based goals.  They told us at the Summer Regional that they were working on a system to track new dollars coming into the branch.  I don't think it's ever really been a focus before.  If it was, I think we'd have a lot more advisors over the $100 mil mark in AUM.  We've got a ton of 10-15 year FAs sitting on $50-70 mil in AUM.  To me that just screams that we don't focus on gathering assets.  I think we talk a lot about it, but we're not trained for it.

Agree with what you all said completely.... My only sidebar is that I feel like new/new low asset getters are almost on the chopping block in this scenario.

I know how Jones does things and I am confident it will be something changed to all the NEW new/news not someone who has been at it for 2 yrs. I feel like that advisor is at an extreme disadvantage.

Someone else said that Jones doesn't care. I agree, they push FAST and Advisory but if you have little assets and need to make 15K per month, how are you supposed to do FAST with everyone and then sell them a product that makes nothing towards that 15K?

Really they could use a little compassion in that group of people. I feel like when they make these decisions, they almost say that losing these advisors is worth it, given the other effects of their changes.