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New fee based platform at EJ

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Jan 22, 2007 9:23 pm

[quote=AllREIT]

You realise that the future of this industry is towards fee based advice from disinterested advisors? There is a reason that Vanguard opens up 4000 advisory accounts a month.

The future of this business is fee-based done by RIA's. You can either try to fight the future, or be on the right side of it.

[/quote]

So, you really think that the future is going to be all RIA's, no commissioned FAs, no Merrill, Morgan, UBS, Jones, etc? 

Isn't the term "disinterested advisor" an oxymoron?  Simply by being an advisor aren't you "interested" in that client's accounts.  Aren't you going to form your own bias based on fund performance, stock preferences, etc? 

If we do away with the wirehouses, regionals, Indies and all that's left are RIA's don't you think the Vanguards of the industry will figure out a way to draw us to their platform vs Fidelity?  This industry is about two sets of people making money:  The clients and the advisors.   The question is who makes more the former or the latter?  

Jan 22, 2007 10:17 pm

AllREIT-

I think you're missing the fact that not EVERYONE in America wants to pay 1% per year for investment services.  Some people just want you to invest their 401K rollover and be done with it.  I do realize that fee-based service is a huge piece of the business, and that firms (i.e. Jones) need to embrace it more.  But, I don't think commission-based service is ever going away completely.  Personally, I can't wait to do more of it.  But it is still a fact of life for the majority of the mainstream industry (not that I am basing that on any hard stats).

And I think Nole made the point that he would like to do it as well (more fee-based), but is still too early on to go out on his own, as many of us are.  And that is the unfortunate part - you can't just decide one day to go into this business and start doing fee-based business as an Indy.  Most people, at some point, had to work in a commission-based environment.

I just think, although fee-based is making a huge run, that it is not going to take over the entire industry as some think.  There will always be a mix of business models out there.

Jan 23, 2007 12:46 am

Hot off the press...

Investment Representatives at Jones are now called Financial Advisors.  Series 66. Change must be in the wind.

Jan 23, 2007 1:02 am

BTW, I think we are meaning 2 different things when we say fee based. I don’t mind doing fee based asset management in the sense of charging a percentage of assets under management. Most of my high value clients currently prefer that fee structure…as do I. However, at AMP, I am not allowed to engage in transactional business. In other words, somebody can’t simply come to me and roll over $500,000 and simply pay 1% to do so. At least in my market group (region), they must pay an annual planning fee (between $300 and $3,000) on top of any commission or asset based fee. That is the fee that I am talking about wanting to get away from.

Jan 23, 2007 1:30 am

I'll play devil's advocate here. Given the tenacity that EJ fought against fee accounts and now their eventual acceptance, in the normal course of business; something smelled fishy. Consider this scenario:

You're a GP looking for some extra revenue. You've currently got eleventykabillion dollars in MF assets paying you annual trails of .30%+/-. Yuck! Oh, I know, convert half (or more) of those MF assets to fee accounts at 1.0%, 1.5%, 2.0% annually and viola: more recurring revenue! Lots more!

Clip'em on the A shares, then flip'em into fees. Ahhhhh, life is good!

Jan 23, 2007 1:57 am

[quote=Spaceman Spiff][quote=AllREIT]

You realise that the future of this industry is towards fee based advice from disinterested advisors? There is a reason that Vanguard opens up 4000 advisory accounts a month.

The future of this business is fee-based done by RIA's. You can either try to fight the future, or be on the right side of it.

[/quote]

So, you really think that the future is going to be all RIA's, no commissioned FAs, no Merrill, Morgan, UBS, Jones, etc? [/quote]

Pretty much, Mostly because assets will convert one direction only and less new money will flow in to the commision channels.

[quote]Isn't the term "disinterested advisor" an oxymoron?  Simply by being an advisor aren't you "interested" in that client's accounts.  Aren't you going to form your own bias based on fund performance, stock preferences, etc? [/quote]

Disinterested from a financial perspective. I.e I don't get paid extra for pushing a preferred fund. I do have a slight interest in clients not losing money since that lowers AUM.

OTH if I sell you bunch of A shares of Van Wagoner Emerging Growth, and it falls 40%, I don't really care that much since I've made my 3%.

[quote]If we do away with the wirehouses, regionals, Indies and all that's left are RIA's don't you think the Vanguards of the industry will figure out a way to draw us to their platform vs Fidelity?  This industry is about two sets of people making money:  The clients and the advisors.   The question is who makes more the former or the latter?  

[/quote]

This is the classic problem of "Where are the customer's yachts". The amount of  money that is being managed in Vanguard Advisory accounts, Amerivest accounts etc etc is only going to increase with time.

It's going to be much harder for B/D's to get at this money. It's a volumes vs gross margin thing. On the whole clients pay more at B/D and get worse advice, hence RIA's will dominate this industy.


Jan 23, 2007 2:11 am

[quote=Broker24]

AllREIT-

I think you're missing the fact that not EVERYONE in America wants to pay 1% per year for investment services.  Some people just want you to invest their 401K rollover and be done with it.  I do realize that fee-based service is a huge piece of the business, and that firms (i.e. Jones) need to embrace it more.  But, I don't think commission-based service is ever going away completely.[/quote]

It won't go away completely because it is so profitable. This is same reason that VUL gets sold. It's rarely in the best interests of the clients but it sure is the best interests of the agent. So people keep plugging away at it. 

[quote]And that is the unfortunate part - you can't just decide one day to go into this business and start doing fee-based business as an Indy.  Most people, at some point, had to work in a commission-based environment.[/quote]

Seriously, you are deluding yourself. If you do the ML 15M AUM in 2 years, you will have $150,000 in annutised business at the end of year two.

If you charge an hourly planning fee, you can make plenty of money even without holding a single thing.

Just say to yourself, I will have ten billable hours per week (@ 200/hr) and custody fee's are gravy.

[quote]I just think, although fee-based is making a huge run, that it is not going to take over the entire industry as some think.  There will always be a mix of business models out there.[/quote]

And there is still a small market for leaded gasoline.

 The race is not to the swift, nor the battle to the strong, but that's the way to bet them.

Jan 23, 2007 2:16 am

[quote=Nole32303] However, at AMP, I am not allowed to engage in
transactional business. In other words, somebody can’t simply come to
me and roll over $500,000 and simply pay 1% to do so. At least in my
market group (region), they must pay an annual planning fee (between
$300 and $3,000) on top of any commission or asset based fee. That is
the fee that I am talking about wanting to get away from.[/quote]



We all know that AMP is lame.



Fee-based, means you earn no comissions from sales of products, all
your compensation comes from fee’s directly charged to the client. How
you charge those fee’s is up to you.

Jan 23, 2007 2:20 am

[quote=doberman]

I’ll play devil’s advocate here. Given the tenacity

that EJ fought against fee accounts and now their eventual acceptance, in

the normal course of business; something smelled fishy. Consider this

scenario:



You’re a GP looking for some extra revenue. You’ve currently got

eleventykabillion dollars in MF assets paying you annual trails of .30%+/-.

Yuck! Oh, I know, convert half (or more) of those MF assets to fee

accounts at 1.0%, 1.5%, 2.0% annually and viola: more recurring revenue!

Lots more!



Clip’em on the A shares, then flip’em into fees. Ahhhhh,

life is good!

[/quote]



Sounds like a great scenario, but I doubt that’s how it will work in reality.

I can’t imagine being able to flip A-shares over into a fee’d account. I

think we will be talking about NEW money going in. If I were a betting

man, I would say that there will be advisor class funds from the preferred

fund families going into whatever our new managed program is called. I

just know that Jones is not going to abandon their Preferred Fund

relationships altogether for a fee-based world. I’m neither defending it

nor criticizing it, it’s just my gut feeling. Allowing anything into the

managed accounts would not hurt Jones financially (the managed fees

would be larger than A-share revenue sharing income), but it may

jeopardize their preferred fund relationships if the FA’s (how 'bout that?)

start popping ETF’s and Index funds into them instead of preferred funds.

But I can’t imagine putting some of those funds into a wrapper. The

combined expenses would be too high on most, other than maybe

American. I’ll be very interested to see what they come up with.
Jan 23, 2007 3:36 pm

When I was at Jones I had several clients who went from A-shares to MAP within 2 years. FSD just had me document that it made sense from a tax standpoint and that they'd made up their sales charges. These clients should have been in MAP all along (it's exactly what they wanted) but our RL railed against anything fee-based at every regional meeting.

Feb 22, 2007 4:26 am

Nole,  I'm a franchisee with Ameriprise.  You're obviously a corporate trainee, as you mentioned working with 60 "young, greasy" trainees. 

I can work in a Fee-only capacity, a Fee-based, or transactional/commissioned capacity.  I've never heard of being forced to sell plans with all clients.  But at least it starts a process of getting all of thier info to help them plan COMPREHENSIVELY instead of just dispensing random free advice.  If you're going to use that series 66, you might as well take a holistic approach.  The client will see the value (or they can get their fee back from corporate).

Anyway, you act like you're forced to plan.  I'm not.  You can own your client base by becoming an Ameriprise franchisee, or you can be an employee.