I think it helps clients in that we focus more on putting the right investments in place, rather than the right commission on our grids.  I know for a fact that a lot of commission-based advisors make decisions based on the commissions.  I know plenty of FA’s in my region that “love” UIT’s.  Why?  Why do you think?  Does 4.5% ring a bell?  I have guys TELL ME how to “maximize” gross.  Some long bonds, some UIT’s, lower fund breakpoints, I’ve heard it all.  I am sure I am not alone in witnessing this.  And I know it’s not just at Jones.

I’ve seen plenty of fee-based advisers do a “set them and forget them” with advisory clients.
Worst question I’ve ever been asked:
FA called compliance to run an issue by us for hopefully our blessing.  Client had a fee-based account and died.  The executor is working with the FA to straighten out the financial accounts.  FA asked me if he had to tell the executor about the account.  He didn’t spell it out, but he gave me the impression that he wanted to continue collecting the fee.

[quote][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]

Think about the question a little more next time before you answer…The great majority of profit from EJ comes from the revenue sharing agreements supplied by those mutual fund companies BECAUSE they were 1 of only 7 or 8 and because one of them was used for 60% of all the mutual fund flows. BTW, the revenue sharing fees aren’t tiny… Say a FA has been in business for 20 years and has sunk say 50-60% of his assets in mutual funds with American, do you really think that he will be able to move that high of a percentage of clients quickly into AS so that he can build a fee based business?

[quote]Active management funds time the market? Since when? I thought they looked in depth at company fundamentals to determine which companies would be most profitable, thus go up in value the most. That’s not market timing.[/quote] 
 
Sure it is… They are just using fundamentals…and not technical… But they are still saying that a basket of "x’ stocks will go up quicker than basket of “y”

[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] 
 
No they won’t get as many companies too sponsor nor will they get the companies that do sponsor pony up the amount of money they do now… HOWEVER…75% of jones is funds… and if you can quadruple the amont income you are bringing in by just xfering from 25bps to 125bps then you don’t have to worry about it… But i bet expansion stops for 3-4 years for the catch up…

[quote]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.[/quote] 
 
Depends on platform… I have a buddy at LPL that buys investments in their fee program(SAM) based on ticket charges and then rebalances only once a year to avoid tickets(no because he believes its the best thing to do)…

[quote][quote][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]

Think about the question a little more next time before you answer…The great majority of profit from EJ comes from the revenue sharing agreements supplied by those mutual fund companies BECAUSE they were 1 of only 7 or 8 and because one of them was used for 60% of all the mutual fund flows. BTW, the revenue sharing fees aren’t tiny… Say a FA has been in business for 20 years and has sunk say 50-60% of his assets in mutual funds with American, do you really think that he will be able to move that high of a percentage of clients quickly into AS so that he can build a fee based business?[/quote]
1:  I have thought about it.  Your question is a question of math.  How can a higher fee on the same dollar MATHEMATICALLY mean less money?
2:  Your 20 Vet scenario describes me exactly and the answer to your question is yes.  I am about 80% fees/trails and it is way more profitable than revenue sharing.  I checked my bonus and my P & L.
 

Love the make it rain avatar.

I thought you would appreciate it…but I’m still shopping around for a good avatar.  Is it possible to load one up from a website instead of saving it to your computer?

I have a friend that is indy, 90% fee-based.  He says he generally only uses NTF funds (i.e. load-waived A-shares for the most part) so he can avoid the ticket charges.  Not saying it’s right or wrong, but it sort of flies in the face of “fee-based is totally impartial”.
Unless the industry ever does away with commissions altogether (fat chance), there will always be some level of conflict.  However, I think this disipates as your practice grows and you become a “go-to” firm, and people don’t care what they pay to work with you.

I can’t tell if you are talking to me or not B, but I’ll respond anyways.
I would, and did, argue that Fee-Based isn’t some “divine” compensation type.  It all depends on the client’s situation.  There are times when commission-based makes more since, etc.
I hate the Expense-conscience Vanguard-loving DIYers who preach the bible of “Fee ONLY” as the most conflict-free option.

Also, in the past, whenever I got a marketing piece that sells Fee-Based advisory accounts, and uses the phrase “makes us sit on the same side of the table as the client” or something like that (illustrating that there is no conflict and the FA has the same goals as the client), I STRUCK IT DOWN WITH MY MIGHTY REJECTED STAMP.

[quote]I can’t tell if you are talking to me or not B, but I’ll respond anyways.
I would, and did, argue that Fee-Based isn’t some “divine” compensation type.  It all depends on the client’s situation.  There are times when commission-based makes more since, etc.
I hate the Expense-conscience Vanguard-loving DIYers who preach the bible of "Fee ONLY[/quote]" as the most conflict-free option. 
WB, I was just responding in general.  I think the only thing that matters is full-disclosure to your client.  I think clients appreciate you being very upfront about the costs.  "Mr. Client, this is going to cost you x.xx% per year.  You could pay LESS in direct commissions with another method.  That would require either (a) you doing it yourself, or (b) paying commissions and utilizing 1 or 2 fund families for all your investments.  Here’s the pros and cons: blah, blah, blah (talk about multiple fund families, no fund family is best at everything, the funds we would use would strip out 12b-1’s so the cost is a little closer, the fact that your out-of-pocket cost would be higher, we can’t use the exact same strategy with a single-fund family, etc.).  I just want to make sure you are clear on your options."
Now, if you are commission-only or fee-only, you can still have that conversation, but it just means that they would have to go elsewhere if they decide not to “choose” your method.  From what I have experienced, more potential clients have walked away when I was commission-only than have balked at paying fee-based.  This is likely because fees have become more industry norm, and the financial media has started touting it as “conflict-free”.
However, I am now seeing more and more financial “experts” saying you should only work with an advisor that works on a one-time flat-fee only for advice or ongoing flat-fee for investment advising, not an AUM fee.  The only problem with that is I am not sure how we could actually make a living that way. 

[quote]

However, I am now seeing more and more financial “experts” saying you should only work with an advisor that works on a one-time flat-fee only for advice or ongoing flat-fee for investment advising, not an AUM fee.  The only problem with that is I am not sure how we could actually make a living that way. [/quote]
I don’t have a single client that would want that arrangement. Set it and forget it til next year? No. The reason my clients have me and have referred me is they respect having eyeballs on their account each and every month. The reason I’ve been chosen to intercede is because their fears and lack of expertise.
Flat-fee advising then, becomes a pay-as-you-go scenario. Worried about what CNBC said? Sure, give me a call. I’ll starting talking to you right after I turn on the clock, at $150 an hour. Feel free to chat away. I just don’t see that being very popular in my neck of the woods.

Lock, I agree with you.  I just don’t think it makes sense.  The only scenario where it appears to work consistently is at the top-end of our business, like the family offices, where an annual retainer might be $100K or more.  And it works because they are doing more than just managing investments - they are paying bills, coordinating estate plans, doing tax work, charitable giving, etc.  In these situations, there is not a direct correlation between work performed and AUM (although the AUM will obviously be extremely high).

I agree with both of you.  Whenever I think of a Fee-Only adviser, I think of an adviser handing over a Morningstar analysis.

Fee only solutions can make it less of a conflict for advisors. But by the same token, commission only advisors are not inherently obligated to a conflict of interest.
At the end of the day someone said lets do this for a fee of AUM instead of commissions because it made sense to their business. They weren’t some benevolent group that decided to change the way the industry billed out because they wanted to.

Good discussion and I certainly agree with you there is not 1 way for everyone to work. That is primary reason that I hope Congress stops all these non 7 licsensed annuity people from acting like investors (to me that is the worse thing in our industry).
Of course it is important to annutize your business and there is nothing wrong with that. My beef with AS instead of some INDY doing it themselves is the hidden fee side. Most advisors think that the client LITERALLY only pays 1.35%.
I want to have my business paid on a AUM basis but I don’t really want to have all my clients money in mutual funds or have Edward Jones manage the mutual funds for me. Does anyone think there will be a time in Jones for an advisor who wants to be a CFP planner or are we being led further and futher into the salesman role?

The other benefit of fee based business is that it eliminates the benefit of churning. I’ve seen cases of four segment fives with monthly income varying by a factor of 100%. All with the same basic AUM. A 15% or 20% variance is fine, but not 100%. After hearing about some of the trades I wonder how they get through field supervision.

Another benefit of Fee based business is that you don’t even have to talk to a client more than once a year to collect a check.