Edward Jones Advisory Solutions
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[quote=chief123][quote=Wet_Blanket]Just as an aside, one thing that I always found interesting in this industry. Clients are often told that market timing doesn’t matter, and x% of returns is from allocation, the time you get in doesn’t matter that much…yada yada yada.
But then those exact same firms scrutinize every trade by a SMA manager, constantly wanting to know about "trade rotation" and if they are getting prices consistent with what other platforms are getting. Next time we should just tell them that market timing is meaningless and the investment itself is most important. [/quote] S&P market return 9.66% If you missed best days 10 days..6.44% 20days...4.16% 30days...2.18% 40days...0.47% If you missed worst 10days...14.67% 20days...17.28% 30days...19.46% 40days....21.46% .....so timing does matter(doesn't that make EDJ a little hypoctricial(along with most fund companies that timing doesn't work) then why pay for active managed funds?) [/quote] I absolutely HATE when firms (mine included) tote out the old "missing the best days" crap, but politely forget to mention what happens if you miss the worst days. It's not so much about "timing" in the classic "day trader" sense that most people picture it as. It's about downside protection. Getting out of the way of the bus. I read a statistic some time ago - I wish I had logged it somewhere. It said something like if you had simply missed like 75% of the downside of the major "bears" (i.e. 1973/4, 2000-2002, 2008), you only needed like 25% of the upside during the recovery to beat the market, because you had missed so much of the beating. Now, these were NOT the exact numbers (my memory is fading), but it was VERY dramatic. The point was, everyone always talks about how you can't time the market because even if you get out in time, you will miss the recovery. The point of this story was that you don't NEED most of the recovery if you miss the huge downside.I too think it is costlier to the client and would use ETF portfolios to try and trim some of that off. Mgd is the trend in the industry throw, either those select clients pay you more or you must find more clients for the next transaction commission and try to service hundreds or even thousands of clients. It all comes down to the client gets what they pay for and they can vote with their feet.
Not to go off topic but I can't wait to see what will happen if C shares go away, or if the industry moves entirely to fiduciary standard and combine either of those with the average age of broker being over 50. Good times ahead to be in this business 5-10-15 years from now.[quote=LSUAlum][quote=chief123][quote=Wet_Blanket]Just as an aside, one thing that I always found interesting in this industry. Clients are often told that market timing doesn’t matter, and x% of returns is from allocation, the time you get in doesn’t matter that much…yada yada yada.
But then those exact same firms scrutinize every trade by a SMA manager, constantly wanting to know about "trade rotation" and if they are getting prices consistent with what other platforms are getting. Next time we should just tell them that market timing is meaningless and the investment itself is most important. [/quote] S&P market return 9.66% If you missed best days 10 days..6.44% 20days...4.16% 30days...2.18% 40days...0.47% If you missed worst 10days...14.67% 20days...17.28% 30days...19.46% 40days....21.46% .....so timing does matter(doesn't that make EDJ a little hypoctricial(along with most fund companies that timing doesn't work) then why pay for active managed funds?) [/quote] I think that everyone would agree that if you could properly time the market you could out gain the market substantially. The issue isn't whether timing the market is effective but rather if it's practical. Most people agree that you can't know which 40 days are going to be the worst in advance and vice versa on the best. You rely on the active management to use it's experience and knowledge to hopefully avoid some of the worst and capture some of the best.[/quote] But i think you can.. or at least get close...[quote=B24][quote=chief123][quote=Wet_Blanket]Just as an aside, one thing that I always found interesting in this industry. Clients are often told that market timing doesn’t matter, and x% of returns is from allocation, the time you get in doesn’t matter that much…yada yada yada.
But then those exact same firms scrutinize every trade by a SMA manager, constantly wanting to know about "trade rotation" and if they are getting prices consistent with what other platforms are getting. Next time we should just tell them that market timing is meaningless and the investment itself is most important. [/quote] S&P market return 9.66% If you missed best days 10 days..6.44% 20days...4.16% 30days...2.18% 40days...0.47% If you missed worst 10days...14.67% 20days...17.28% 30days...19.46% 40days....21.46% .....so timing does matter(doesn't that make EDJ a little hypoctricial(along with most fund companies that timing doesn't work) then why pay for active managed funds?) [/quote] I absolutely HATE when firms (mine included) tote out the old "missing the best days" crap, but politely forget to mention what happens if you miss the worst days. It's not so much about "timing" in the classic "day trader" sense that most people picture it as. It's about downside protection. Getting out of the way of the bus. I read a statistic some time ago - I wish I had logged it somewhere. It said something like if you had simply missed like 75% of the downside of the major "bears" (i.e. 1973/4, 2000-2002, 2008), you only needed like 25% of the upside during the recovery to beat the market, because you had missed so much of the beating. Now, these were NOT the exact numbers (my memory is fading), but it was VERY dramatic. The point was, everyone always talks about how you can't time the market because even if you get out in time, you will miss the recovery. The point of this story was that you don't NEED most of the recovery if you miss the huge downside. [/quote] We have used an example to illustrate this before to clients. If you have a stock say, Google at $20 per share in year 1. It goes up 30% in year one, down 50% in year 2 and then up 50% in year three how much is the stock worth? . The answer is clearly $19.50. Then compare that to a Muni Zero that pays 4% (leave the tax free part out of this for now) that same 20 would be worth 22.50 or roughly 15% more than the Google stock. It just illustrates the importance of not losing money in bear markets versus gaining it in Bull Markets.So then it sounds like, to over simplify things, you and B24 are willing to “spend” some upside on portfolio hedges - not saying you are currently doing this.
[quote=chief123][quote=LSUAlum][quote=chief123][quote=Wet_Blanket]Just as an aside, one thing that I always found interesting in this industry. Clients are often told that market timing doesn’t matter, and x% of returns is from allocation, the time you get in doesn’t matter that much…yada yada yada.
But then those exact same firms scrutinize every trade by a SMA manager, constantly wanting to know about "trade rotation" and if they are getting prices consistent with what other platforms are getting. Next time we should just tell them that market timing is meaningless and the investment itself is most important. [/quote] S&P market return 9.66% If you missed best days 10 days..6.44% 20days...4.16% 30days...2.18% 40days...0.47% If you missed worst 10days...14.67% 20days...17.28% 30days...19.46% 40days....21.46% .....so timing does matter(doesn't that make EDJ a little hypoctricial(along with most fund companies that timing doesn't work) then why pay for active managed funds?) [/quote] I think that everyone would agree that if you could properly time the market you could out gain the market substantially. The issue isn't whether timing the market is effective but rather if it's practical. Most people agree that you can't know which 40 days are going to be the worst in advance and vice versa on the best. You rely on the active management to use it's experience and knowledge to hopefully avoid some of the worst and capture some of the best.[/quote] But i think you can.. or at least get close...[/quote] In what way? I mean only the very best handful of professional asset managers can consitently beat the market, and even then it's by slim margins. It doesn't take but one bad decision to often wipe out alot of good decisions by trying to time markets.I can't speak for B24, but for me. Absolutely. Hedging the down side risk is the whole point of diversification. When I talk about return to clients I talk about risk adjusted return. If I can get you a 'safe' (careful using that term) 7% versus a 'risky' 10% I think I've done my job. Another example I use is why large institutions and governments buy US Treasuries rather than the S&P Index. It's about reliable steady returns that effectively help wipe out the really nasty bad days times in the market. It's what hedge funds were originally designed to do, but that has since gone the way of speculating for higher returns rather than hedging against lower returns.So then it sounds like, to over simplify things, you and B24 are willing to “spend” some upside on portfolio hedges - not saying you are currently doing this.
[quote=chief123][quote=LockEDJ]
OK, yes you do have to create new paperwork. Considering the philosophy of Edward Jones ... as well you should, true? False... if my goal is "growth and income" how is that helped when the market is collapsing? Why do i have to continue to hold when nothing is going up.. If the true philosophy of edward jones is time in the market, then they should only advise buying index funds...
At the end of the day, the whole concept of AS is to remove emotion from investing(yeah but not to remove advising). A move to cash/reallocate/market-timing-momentum trading is an anathema to the underlying principle(you forgot to add "at Jones"). So requiring paperwork places distance in making that decision and gives the client (advisor?) pause.[/quote] [/quote] False... if my goal is "growth and income" how is that helped when the market is collapsing?Why do i have to continue to hold when nothing is going up.. Edward Jones advises buying quality across the board; that in fact, if you hold those quality investments you will do well and they will recover. Nothing better symbolizes that than the last 36 months. A portfolio of blue chip stocks would have lost nearly nothing in that time period; over the longer time period of the "lost decade" they would have doubled in value. The fact of the matter is, that IF YOUR GOAL IS TRULY GROWTH AND INCOME ... dividend paying stocks would have continued to increase their dividends across the 2008 landscape if you would have only held on. And in the end, your portfolio would have been better for it, rather than all the market timing .... which might have had you pulling out in October 08, and then not knowing when to return. Income can go up, even as portfolio values decline. yeah but not to remove advising who is suggesting that? EDJ focuses on allowing ADVSOL to do the heavy lifting, but using financial planning to do the advising. you forgot to add "at Jones" I thought it was pretty much implied. FWIW ... for purposes of full disclosure, I don't swallow all the Kool-Aide and most know that I've got my issues with Jones. Advisory Solutions isn't one of them.Only andecdotally with some select clients. We haven't done a broad capture ratio for all of our accounts because, while we do a fair amount of discretionary trading fee only accounts, we also have a sizeable portion of the business in transactionally based accounts. Also, we do take client's suggestions on different equities (some of them are quite interesting, both good and bad). But that is a solid thought. I might talk to my business partner to see what amount of resources would make sense to allocate to that type of study.Have you conducted any analysis on your downside / upside capture ratio?
[quote=AGEMAN][quote=LockEDJ]
I think you've got it right. It's more expensive than holding A share mutual funds. However, you should offset that by looking at being able to buy best of breed investments, automatic rebalancing and investment selection - as well as reduction in noise (tinkering with the account).
My experiences have been that my custom models have outpaced the S&P by 150 to 250 basis points. (OK - back off Gaddock/Morean/whomever ... I'm not bragging here). I don't sell performance, but I also think that is reasonable information for the client to have with the proper disclaimers. Finally, if issues surface with the MF management style we can address it. What will you do when Lord Abbett/American Funds/Hartford's investment style blows up?[/quote] And you trust the firm to buy best of breed funds?? Ha Ha--could you put one of your models on here? How about the balanced model?[/quote] Also, a question for Lock. What makes the fund best of breed to Edward Jones? Is it performance, star rating, lipper averages, management style, etc?[quote=AGEMAN][quote=LockEDJ]
I think you've got it right. It's more expensive than holding A share mutual funds. However, you should offset that by looking at being able to buy best of breed investments, automatic rebalancing and investment selection - as well as reduction in noise (tinkering with the account).
My experiences have been that my custom models have outpaced the S&P by 150 to 250 basis points. (OK - back off Gaddock/Morean/whomever ... I'm not bragging here). I don't sell performance, but I also think that is reasonable information for the client to have with the proper disclaimers. Finally, if issues surface with the MF management style we can address it. What will you do when Lord Abbett/American Funds/Hartford's investment style blows up?[/quote] And you trust the firm to buy best of breed funds?? Ha Ha--could you put one of your models on here? How about the balanced model?[/quote] I have all the funds (as of 1/27/2009), but none of the models... I will try to see if I can get a model sheet from my edj buddy...[quote=AGEMAN]
I think the panel of people doing the selecting is pretty darn good. Let’s put it this way; I have no reason to believe you or I could do better. Insofar putting a model up here, clearly I could never do that with a Jones model. That borders on breaking my contract and sharing corporate research.
I don’t think sharing my own work would, and I actually relish the opportunity to hear constructive criticism from people outside Jones. Happy to do it at some point.
To answer LSUAlum; primary importance are the fund managers/process, how they are compensated, whether or not they have a repeatable process, their likelihood to fade, performance naturally. Being out of favor isn’t a determining factor and I’ve noticed they’ve got no problem with Morningstar 3 star funds or no overriding preference for American/Lord Abbett/Franklin Templeton Funds. When it comes to ETFs, size matters.
I would really like to hear what people think that the EJ Advisory Solutions impacts their bread and butter business of revenue sharing on the mutual fund business. American Funds has had a huge outflow of assets which has been a #1 fund company at Jones for years and supplies a significant portion of the revenue sharing dollars. As more dollars shift into AS how will that affect the revenue sharing agreements and will Jones be able to get those companies to sponsor the lion’s share of the expenses for regional meetings and diversification trips understanding that fewer and fewer dollars will be flowing?
I am certainly thankful for the all of the comments and responses esp. from other about the products others carry.
As far as Jones people … don’t be so defensive on here, I just wanted to get a “non regional meeting” answer from some people.
Frankly I am not sure what each other company’s expenses were for their MF wrap accounts, that is why I asked.
A price is a price and I understand that, however it is difficult to make that arguement when you don’t do anything for that price. It isn’t that AS has bad funds or has done anything bad, it is just hard to justify when we do nothing for the fee.
If we did anything for the fee besides ask questions, then I would be keen to charging what we want. Heck I even think I would love to go indy and charge 2.5%. A fee isn’t a problem as long as you get something in return.
Last question about AS, are you all saying that at every other firm clients are paying similiar fees but they are all working on discretion?
You’re missing the big picture on Advisory Solutions. It’s not about the fees or the funds or the research. It’s about taking one more thing off of your plate and letting you do the things that you’re the best at. If you’re like most Jones FAs you don’t know MPT from your elbow and couldn’t fully digest a Morningstar report to save your life, much less tell your client why he or she should own a fund for any reason beyond performance and fees. Your clients would be better served in the long run if you were to focus on things like FAST rather than on things like whether American is a better fund family than Hartford or if A shares are better than C shares.
Yes, your clients are going to pay a fee. If your relationship with those clients don’t change, then you’re certainly not earning that fee. AS gives you the freedom to spend 3 hours on their Financial Statements, Concept Profiler, At Retirement/Retirement, etc and not feel bad about doing it. That’s where you’re going to earn your fee. Those reports are also the place where you can show them the why of investing instead of focusing on the how.
[quote]I would really like to hear what people think that the EJ Advisory Solutions impacts their bread and butter business of revenue sharing on the mutual fund business. American Funds has had a huge outflow of assets which has been a #1 fund company at Jones for years and supplies a significant portion of the revenue sharing dollars. As more dollars shift into AS how will that affect the revenue sharing agreements and will Jones be able to get those companies to sponsor the lion’s share of the expenses for regional meetings and diversification trips understanding that fewer and fewer dollars will be flowing?[/quote]
Is this a serious question? You are pulling my leg. You have got to be better at MATH than this! So your question is, "What will Edward Jones do when the tiny % Revenue Sharing Fees are replaced by the ± 1.35% Advisory Solutions fee? I’ll take a shot at that one. Make more money. Probably more than enough to pay for those meetings and Div Trips. Thanks for the question. You heard what I think.
[quote]I am certainly thankful for the all of the comments and responses esp. from other about the products others carry.
As far as Jones people … don’t be so defensive on here, I just wanted to get a “non regional meeting” answer from some people.
Frankly I am not sure what each other company’s expenses were for their MF wrap accounts, that is why I asked.
A price is a price and I understand that, however it is difficult to make that arguement when you don’t do anything for that price. It isn’t that AS has bad funds or has done anything bad, it is just hard to justify when we do nothing for the fee.
If we did anything for the fee besides ask questions, then I would be keen to charging what we want. Heck I even think I would love to go indy and charge 2.5%. A fee isn’t a problem as long as you get something in return.
Last question about AS, are you all saying that at every other firm clients are paying similiar fees but they are all working on discretion?[/quote]
My guess is that Edward Jones will be like everyone else and just make more money? It’s not like every other wire house doesn’t have wrap accounts.
Don’t kid yourself. Every single ‘innovation’ in this business is to make the firms more money. Those RIA’s that claim that they only do fee based business because it ‘eliminates potential conflicts’ are lying. I can tell you, from experience as an Indy that does mostly fee only business, that I do it because it smoothes out the revenue stream. It makes it easier for me to manage their money. It lets me forcast future earnings better. All of these help our industry. Is it better for clients? Well, that depends. A DCA’er who buys dividend paying stocks and reinvests those dividends is not better off in an account like this. It helps some of our clients to be sure. But the ‘fee only’ proliferation IS NOT because of any other reason than it helps our industry.
I can attest that Fee Based / Only business absolutely eliminates ALL conflicts of interest. It’s been proven that Commisson-Focused FAs are more likely to steal your car. Also, only Fee Based / Fee Only can get into heaven.
Damn, I only made that last post to show off my new Avatar - but the crop cut it down too much.
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