Future of individual bonds
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The Jones model works for the vast majority of the investing public. If you are under 60 and working you need a balanced portfolio of quality mutual funds. Are you smarter than Warren Buffet? NO! Help your clients, do the right thing, and make a nice living.
What is so difficult to understand about that? Why do you think you are better than the experts? If you were you’d be running a hedge fund.
[quote=Weddle Me] The Jones model works for the vast majority of the investing public. If you are under 60 and working you need a balanced portfolio of quality mutual funds. Are you smarter than Warren Buffet? NO! Help your clients, do the right thing, and make a nice living. What is so difficult to understand about that? Why do you think you are better than the experts? If you were you’d be running a hedge fund.
[/quote]
Of course it does Windy. Come down off that ledge now. Please. It’s gonna be all right Wendle… I mean Windy.
Yes. Talk to the experts. They are correct. It’s ok.
I’m not DJ, promise you that. He’s a proven liar from what I’ve heard.
However, my point is still the same. The Jones model is what it is. You can accept that or move on. There are other ways to serve clients and I have no issue with those but stop banging the drum you are an idiot if you stay with Jones. It’s a great company with alot of advantages. The same could be said about any channel.
[quote=Spaceman Spiff]
CMFA - I think that's what it was. I don't have the guy's biz card in front of me. He's moved on in the company, but he was a Goldman wholesaler when I started. I know it wasn't CFA. Whatever it was, it meant he knew more about MPT than I did. Of course at that time I thought beta was either a fraternity or a fish. [/quote] "CIMA" stands for Certified Investment Management Analyst. In my opinion it is much more practical and useful than the CFP. At least it was for me, as I am very hands on in portfolio design for clients. "CMFA" is what you you when you sold a Lehman bond to a client, or what Mario DeRosa did on Monday morning--that is "Cover My F&%43*ing Ass!"[quote=Soothsayer] [quote=Spaceman Spiff]
[/quote]
“CIMA” stands for Certified Investment Management Analyst. In my opinion it is much more practical and useful than the CFP. At least it was for me, as I am very hands on in portfolio design for clients.
“CMFA” is what you you when you sold a Lehman bond to a client, or what Mario DeRosa did on Monday morning–that is “Cover My F&%43*ing Ass!”[/quote]
Nice.
[quote=Soothsayer][quote=Spaceman Spiff]
CMFA - I think that's what it was. I don't have the guy's biz card in front of me. He's moved on in the company, but he was a Goldman wholesaler when I started. I know it wasn't CFA. Whatever it was, it meant he knew more about MPT than I did. Of course at that time I thought beta was either a fraternity or a fish. [/quote] "CIMA" stands for Certified Investment Management Analyst. In my opinion it is much more practical and useful than the CFP. At least it was for me, as I am very hands on in portfolio design for clients. "CMFA" is what you you when you sold a Lehman bond to a client, or what Mario DeRosa did on Monday morning--that is "Cover My F&%43*ing Ass!"[/quote] CIMA sounds right. CMFA is what I'm doing today. Sometime I'd like for Jones just to come right out and say SELL THEM NOW!!! It would make my life so much easier. If any of you ever get the opportunity to hear Mario DeRose speak in person...don't. That guy knows a ton of stuff, but he's no orator. At least when Alan talks he's entertaining. Mario will flat put you to sleep.Interesting thread. Here are my 2 cents, both CIT and GMAC for over a year had both been identified as having a cash crunch (GMAC even longer) and had their ratings downgraded. In both cases you had the oportunity to sell out of your positions but chose not to for one reason or the other. I have never had CIT nor Lehman in my portfilios but i did have GMAC. The last time i did was in 2006 i believe and was out of them at 92 after watching them drop to 76. Could i have held them to maturity (2011) and gambled , hell yes, but i took the money off the table then and put it to work elsewhere. I guess i am a little different then most except for maybe rank and bondguy in that i will trade in and out of my bond positions. We all do things differently , which doesnt make it right or wrong, we all have to be comfortable with our own process.
Training is an interesting topic. A firm will screen a thousand applicants, interview a hundred, and make an offer to 10. Five of those will wash out in the first year. Of the five remaining, maybe one will make the firm a lot of money. The others will be working for a competitor. With these realities, it is difficult to spend a lot of money training newbees on portfolio construction and theory. Face it, the few who become big producers either are connected, lucky, or they’re one hard working sumbitch.
The bond info on Joneslink is good info that should be heeded. Unfortunately, the informal training from mentors, and friends in the region is much more powerful and more likely followed. Many times the big boys in the region would come to me and say; "Coop, your problem is you need to ask for bigger orders. Your a hard worker, and your smart and good with people. You should be making more money. SLM is a good outfit. You won't blow anybody up with them. When you AFTO, ask for 100K. I did. Much to the detriment of those who took me up on the offer. Jones newbes should think bond fund or fixed income UIT. If you are talking Grampa out of his 1.3% CD at the bank, a bond fund yielding 5% should be attractive. Beware of the Vet simpliying the training down to "Ask for bigger orders". Joners would be shocked to see the inventory available elsewhere. What is available to the rest of us is akin to the number of stocks that are available to you. What they offer is a crime, stick to funds.Joners would be shocked to see the inventory available elsewhere. What is available to the rest of us is akin to the number of stocks that are available to you. What they offer is a crime, stick to funds.
Give some specifics as to what EDJ offers in it's bond inventory vs
what is available at other firms. I find it hard to believe that there
would be a lot of difference. All of the large brokerages have the
same access to the bond market, correct? I can see there being
differences when we are talking about new issues and syndicate offerings
, but is there a lot of difference in the inventory at say, Morgan
Keegan, Merryl Lynch, and Edward Jones in regards to the bonds we
have available to sell. I know there have been several times where
a client talked to me about a bond, and maybe they also had another
broker at another firm that they talked with about what they had
available, and it seems that more times than not they bought the
bond from me.
By the way, I do agree with you about there being some advisors at
EDJ, who are too quick to put a large amount of money in one bond
just to get a sale. That's bad for the client!
In ten seconds, I went to Zionsdirect. I asked for the list of investment grade bonds, that would come due in 2025.
There were 1724 hits. Narrow the search to only A or better? 1200. How about A or better, due in 3 years or less? Only 400.
Congratulations on having committed clients though.
The difference is profound. Hundreds of munis to choose from in my state. If you or your client like a specific issuer, you can see all available bonds in the market to choose from. Bonds are purchased in the open marketplace, not bought from what Jones holds in inventory. Imagine if you would only buy the individual stocks Jones had in inventory for sale? Going back to SLM, last month I bought a a bond, matures in three years. It had a coupon of 5.5% priced in the 60s callable anytime. We also have a very quick and easy system to build/sell/buy ladders. I’ve heard Jones is making changes in this area which is good. Jones is great at teaching FAs how to sell them, and I appreciate the training they gave me. I could care less how the large producers sell individual bonds, I just think the newer guys should tweak their approach and learn a bond fund story. If their goal is to take Grampa out of a bank account that is earning next to nothing right now, the yield of a fixed income fund should be enough of an enticement.
The difference is profound. Hundreds of munis to choose from in my state. If you or your client like a specific issuer, you can see all available bonds in the market to choose from. Bonds are purchased in the open marketplace, not bought from what Jones holds in inventory. Imagine if you would only buy the individual stocks Jones had in inventory for sale? Going back to SLM, last month I bought a a bond, matures in three years. It had a coupon of 5.5% priced in the 60s callable anytime. We also have a very quick and easy system to build/sell/buy ladders. I’ve heard Jones is making changes in this area which is good. Jones is great at teaching FAs how to sell them, and I appreciate the training they gave me. I could care less how the large producers sell individual bonds, I just think the newer guys should tweak their approach and learn a bond fund story. If their goal is to take Grampa out of a bank account that is earning next to nothing right now, the yield of a fixed income fund should be enough of an enticement.
I understand that at EDJ we sell bonds out of our inventory. The bonds
in our inventory are brought in from the market. Based on past
experiences, it doesn't appear to me that the bonds (especially munis)
we have in inventory are inferior to what investors are able to find
with other brokerages (whether from the open market or out of another
firms inventory). In the past when I have had a client take a look
at what I could offer vs say what the broker at Raymond James offers,
I have usually had the best bond. Maybe that was coincidence, but it
has been my experience.
[quote=DB Cooper] The difference is profound. Hundreds of munis to choose from in my state. If you or your client like a specific issuer, you can see all available bonds in the market to choose from. Bonds are purchased in the open marketplace, not bought from what Jones holds in inventory. Imagine if you would only buy the individual stocks Jones had in inventory for sale? Going back to SLM, last month I bought a a bond, matures in three years. It had a coupon of 5.5% priced in the 60s callable anytime. We also have a very quick and easy system to build/sell/buy ladders. I’ve heard Jones is making changes in this area which is good. Jones is great at teaching FAs how to sell them, and I appreciate the training they gave me. I could care less how the large producers sell individual bonds, I just think the newer guys should tweak their approach and learn a bond fund story. If their goal is to take Grampa out of a bank account that is earning next to nothing right now, the yield of a fixed income fund should be enough of an enticement.
I understand that at EDJ we sell bonds out of our inventory. The bonds
in our inventory are brought in from the market. Based on past
experiences, it doesn't appear to me that the bonds (especially munis)
we have in inventory are inferior to what investors are able to find
with other brokerages (whether from the open market or out of another
firms inventory). In the past when I have had a client take a look
at what I could offer vs say what the broker at Raymond James offers,
I have usually had the best bond. Maybe that was coincidence, but it
has been my experience.[/quote] There is always a cost to having an inventory system that you have to supply. There will always be one more hand in the pie. The inventory supply that Jones has in Munis is quite a bit different from what those who have access to the Street's inventory can show. If the bonds that are in Jones inventory are better than what is on the street, why are they moving away from the green screens?
[quote=Advisor238] [quote=DB Cooper] The difference is profound. Hundreds of munis to choose from in my state. If you or your client like a specific issuer, you can see all available bonds in the market to choose from. Bonds are purchased in the open marketplace, not bought from what Jones holds in inventory. Imagine if you would only buy the individual stocks Jones had in inventory for sale? Going back to SLM, last month I bought a a bond, matures in three years. It had a coupon of 5.5% priced in the 60s callable anytime. We also have a very quick and easy system to build/sell/buy ladders. I’ve heard Jones is making changes in this area which is good. Jones is great at teaching FAs how to sell them, and I appreciate the training they gave me. I could care less how the large producers sell individual bonds, I just think the newer guys should tweak their approach and learn a bond fund story. If their goal is to take Grampa out of a bank account that is earning next to nothing right now, the yield of a fixed income fund should be enough of an enticement.
I understand that at EDJ we sell bonds out of our inventory. The bonds
in our inventory are brought in from the market. Based on past
experiences, it doesn't appear to me that the bonds (especially munis)
we have in inventory are inferior to what investors are able to find
with other brokerages (whether from the open market or out of another
firms inventory). In the past when I have had a client take a look
at what I could offer vs say what the broker at Raymond James offers,
I have usually had the best bond. Maybe that was coincidence, but it
has been my experience.[/quote] There is always a cost to having an inventory system that you have to supply. There will always be one more hand in the pie. The inventory supply that Jones has in Munis is quite a bit different from what those who have access to the Street's inventory can show. If the bonds that are in Jones inventory are better than what is on the street, why are they moving away from the green screens?[/quote] We are moving away from the green screens because it is very inefficient to have 2 systems. Eventually, green screens, as a whole will disappear. It has nothing to do with inventory. One thing I like about Jones (under Weddle at least) is that they are always looking for ways to make our lives easier. While we are certainly not the leader in Technology, we have come a helluva long way under Jim! Even as short a time since you left noggin, we have new state of the art phonesystems, check scanners...and lots more changes on the way. Bondnet is one of them!
Fact: our inventory is no worse than at Merrill. I have compared with friends. I have also compared our prices to EMMA transactions and there is little difference (in both directions). We also don’t compete with our own bond traders for inventory. At Merrill, their traders would rather sell $5mm to Edward Jones than to their brokers’ own clients. And this is not Jones “lore”. This comes from my own research and conversations with Merrill reps. In addition, I have two clients that also have bond portfolios at Wachovia and MSSB, and they actually SHOW ME what they are being offered from inventory, and it’s nothing more than what we have. And often we have something better.
In addition, sometimes FA's forget that they can call the bond desk about a specific issue and get them to go buy some. I do that a few times a month on in-state bonds when I have a client that wants some bonds with specific criteria. I will go out to EMMA or MunicipalBonds.com and find them, then ask my guy to go get them (if they are of acceptable cerdit rating to Jones, which IS a problem for us sometimes).[quote=B24]Fact: our inventory is no worse than at Merrill. I have compared with friends. I have also compared our prices to EMMA transactions and there is little difference (in both directions). We also don’t compete with our own bond traders for inventory. At Merrill, their traders would rather sell $5mm to Edward Jones than to their brokers’ own clients. And this is not Jones “lore”. This comes from my own research and conversations with Merrill reps. In addition, I have two clients that also have bond portfolios at Wachovia and MSSB, and they actually SHOW ME what they are being offered from inventory, and it’s nothing more than what we have. And often we have something better.
In addition, sometimes FA's forget that they can call the bond desk about a specific issue and get them to go buy some. I do that a few times a month on in-state bonds when I have a client that wants some bonds with specific criteria. I will go out to EMMA or MunicipalBonds.com and find them, then ask my guy to go get them (if they are of acceptable cerdit rating to Jones, which IS a problem for us sometimes).[/quote] I wouldn't know what the inventory is at Merrill Lynch. I do talk to friends that are still at jones and when we compare inventory it is not even a fair discussion. That may be for a variety of reasons,i.e. not as much issuance in the state..... I know that your main competitor in your area is Merrill Lynch so you are wise to compare to what they have. Being independent the inventory for fixed income is far superior to what Jones has........ BTW, I call our Bond desk when I am looking for specific GNMA that we need for a client. I use municipalbonds. com also and find many of the offerings that are listed in there are sitting waiting to be purchased by my client without ever having to call a trading desk to get them. It stands to reason that IF you have to buy something and place in inventory for brokers to sell that there is an implicit cost to do that.[quote=noggin][quote=B24]Fact: our inventory is no worse than at Merrill. I have compared with friends. I have also compared our prices to EMMA transactions and there is little difference (in both directions). We also don’t compete with our own bond traders for inventory. At Merrill, their traders would rather sell $5mm to Edward Jones than to their brokers’ own clients. And this is not Jones “lore”. This comes from my own research and conversations with Merrill reps. In addition, I have two clients that also have bond portfolios at Wachovia and MSSB, and they actually SHOW ME what they are being offered from inventory, and it’s nothing more than what we have. And often we have something better.
In addition, sometimes FA's forget that they can call the bond desk about a specific issue and get them to go buy some. I do that a few times a month on in-state bonds when I have a client that wants some bonds with specific criteria. I will go out to EMMA or MunicipalBonds.com and find them, then ask my guy to go get them (if they are of acceptable cerdit rating to Jones, which IS a problem for us sometimes).[/quote] I wouldn't know what the inventory is at Merrill Lynch. I do talk to friends that are still at jones and when we compare inventory it is not even a fair discussion. That may be for a variety of reasons,i.e. not as much issuance in the state..... I know that your main competitor in your area is Merrill Lynch so you are wise to compare to what they have. Being independent the inventory for fixed income is far superior to what Jones has........ BTW, I call our Bond desk when I am looking for specific GNMA that we need for a client. I use municipalbonds. com also and find many of the offerings that are listed in there are sitting waiting to be purchased by my client without ever having to call a trading desk to get them. It stands to reason that IF you have to buy something and place in inventory for brokers to sell that there is an implicit cost to do that. [/quote] Noggin, I think you're right. From what I understand, most wirehouses, regionals, etc. manage their bond inventories in simlar fashion, so the difference in inventory will just be a matter of symantics. But with certain independant firms, I think you essentially buy from the "street" inventory. In other words, they don't really maintain an "inventory" for the firm. In any case, there will be a cost to transact either way. Whoever you buy them from for your client is going to charge a markup, and you are going to charge a markup so that YOU can make money (or you pu it in a fee account, so they still get charged either way). This is a simplistic explanation, but the bottom line is, we are both buying them from someone that wants to make money, and selling to our clients in order to make money. When I review transactions from EMMA, and compare to our inventory, the markups are no different.The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks. I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer. He understands now and will be carefull of anything his WA broker is pushing. Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a sh!#y investment they could not unload it fast enough.[quote=Greenbacks]The only problem I have with LPL is you need to buy a minimum amount of bonds, say ten or 50 bonds in one holding.
I just got off the phone with a client and had to explain this to him, he made the comment that his WA broker could buy one or two bonds at a time. I then explained to him I am indy and do not hold an inventory of bonds or stocks. I further explained how holding an inventory of anything can be a conflict of interest between the client the rep and the dealer. He understands now and will be carefull of anything his WA broker is pushing. Like I told him if it is a good investment why would WA be trying to get rid of it? If it is a sh!#y investment they could not unload it fast enough. [/quote]You don't like the fact that you'd have to buy $10k at least of a specific bond? That's too much juice for your clients? How small a buy are you looking to make? Do you do the same thing with equities and find yourself always buying 32 shares of Apple?
The way you explained things to your client sounds like you're the one confused. Even as an indie you MUST have some access to bonds, right? Perhaps BondDesk or the like? That's not an inventory you have to hold, you simply are looking at what's out there at different bond desks in the business.
I can't speak for WA, whoever that is, but not everyone keeps inventory. They can pull down bonds as needed from elsewhere. If a BD does keep an inventory for retail, there's not a natural conflict of interest there. There’s a place for proprietary trading and a place for retail brokerage. You misinformed your client to cover for your lack of access.