[quote=BigPayDay] [quote=exdrone]

[quote=BigPayDay]Ex, You didn't answer the question. Specifically how is Jones "screwing" their clients? BPD[/quote]

I did not see your question while I was typing my last response.  Here's one way comes to mind immediately.  Preferred fund families.  I'll believe Jones does due diligence on fund families when the remove one from the list for imploding.  I believe they are in the business of extracting kickbacks, and as long as the payment is made, they stay on the list.  I see that as screwing clients.

[/quote]

Ex,

If this is truly the case then why is it that the fund family that Jones gets the least revenue sharing on is the one that is the most widely used?

BPD [/quote]

First, I did not say that the IR's were screwing their clients, my comments applied to the firm and its management. 

You help me make my point by indicating that one fund family gets most of the business.   If Jones got rid of the pref family system and did a better job of informing IR's on other avail funds they would not be stuck recommending American so excessively.

[quote=success]

I have a question.  If I gross $525,000 at Jones and have about a 38% payout. ($199,500 net), $46,000 in bonuses and 8600 in total profit sharing, that comes to a 48% payout.  If I add the trips in then it comes to 50%.  I havent even mentioned the LP return.   So, if my payout is 50%, why would I go indy to get 55-60 % (after exp) payout?  Assume I dont care about selling my book.  I will prob. transition to my kids into to it anyway.  INdy may have more products, but I am willing to bet that most are not that good for our clients, like a $1m B share annuity ticket.

[/quote]

OK I'll use small words to make sure all you jones boys understand....

Let's see....you're right as far as "forget the LP return" since that is a return on an equity investment in the firm.  If you're gonna count yoru payout like that the boys at Merrill should be able to count performance of the stock in their ESPP as part of their payout.

The money in the profit sharing is technically yours, but not available for your use right now.  If you did withdraw that 8600, at your hypothetical income level it would be more like 5000 or less after taxes and penalties.

Regardless of the value that Jones may put on your w-2 for the trips, they are not liquid or saleable.  You can't even take your boyfriend or girlfriend if you are not married.  So, clearly that deserves some sort of valuation discount compared to your hypothetical indy payout of 55-60 percent.

So you're really nowhere near that 50 percent you talk about, although I must admit the payout at Jones is perhaps better than I realized.

Real indy net payouts are all over the place depending upon your product mix and your business structure and expenses.  Mine will likely be somewhere closer to 60-65 percent next year, but my expenses are pretty low.

While your at it, you also forgot to account for all of the other expenses you bear as a Jones IR, such as technology charges, custodial expenses(or you clean yourself), postage(50% right?), and office supplies.  Where does that leave us?

And then there's the fact that I'm free of a cult-like atmosphere described by many at jones.  And, if my b/d changes in ways I don't like, or if I end up having an 'issue' with anyone in management, I can just leave because the book is MINE by contract.  That, by the way, tends to keep the b/d honest in the services they offer and their pricing, because they know they have competition.  I don't have to worry about lawyers from DesPeres sending me dunning letters, or hired guns being handed my book and given an incentive to chase after it.  None of that b.s.

Hey look, Jones is fine for some of you, and from what I've seen from posts by some of you IR's, you've built some great businesses, learned a lot about the markets, and treat your clients well.  But I sorta get the sense that's the exception that proves the rule.

I'm not saying that Jones is a bad firm, or that ALL of the advisors are stuffing their widow clients into today's version of "touchdown bonds", but really stop justify your payout versus indy....your trying to pee up a rope.  And grow up and spare us the snide commenst about "1m b-share annuity tickets", and I'll forgo mentioning the California suit yet to be settled, long GMAC bonds, and storefronts in strip malls.

Great post joe,

We're about due for an, "It's not all about money" comment from one of the Jones boys.  That's their way of conceding defeat. 

Of course they usually start the payout talk repeating the propoganda they hear from St Louis.

Ex,



So when you say “screwing” do you mean that our clients are overpaying or being sold inferior products or both?



BPD

BBD,

I concede.  American funds for everyone.  You're nuts, I'm an ass.  Lets do this again next year.

Ex,



Are you afraid to back up and/or clarify your “Jones is screwing their clients” comment. Are you afraid to answer my question? Let me ask it again. When you say “Jones is screwing their clients…” do you means Jones’ clients are being over charged or being sold inferior products or both?



BPD

Dude,

My biggest issue with Jones with respect to clients is the preferred funds family system.  The supposed due diligence that Jones does on these fund families is a total sham.  They are not the most diversified fund families or the best from a performance standpoint across asset classes.  If your firm truly has no conflicts of interest why dont you have the best fund managers on your preferred funds list.  Answer: It is a scam based on kickbacks and that is not in the best interest of clients.  The limited choices maximize flows to the chosen companies...that maximizes kickbacks, it is not about who pays the most.

Ex,



You still didn’t clarify how Jones is screwing their clients. Do you feel our clients could have gotten better net returns and lower fees at your firm or if they were a client of yours over the past 10 years?



BPD

I have made it clear where Jones fails in providing IR's with the info and tools they need, as well as their motivation for it.  The clients are being screwed by promising objectivity and due diligence and delivering neither.  How many different ways do I need to say it?

Promising better returns is a game I never played and I'm not going to start now.  As for fees, I am not nor do I strive to be the low cost provider of financial advice.

Is your method of pitching product showing hypos and promising the lowest cost?

BTW, this seems to be a very personal issue for you.  Are you a GP?

Ex,



So because I build a diversified American Funds Mutual Fund portfolio of say: 20% American High Yield Tax Free, 20% Capital Income Builder, 20% American Mutual, 20% Capital World Growth and Income and 20% Growth fund of America I haved screwed my clients? Who’s brainwashed? At least I can sleep at night. You say that Jones’ preferred fund families aren’t very good across different asset classes. Show me different funds for the asset classes I mentioned above that have had better net returns (Isn’t that what we are trying to provide to our clients?), lower turn over (Lower tax liability), lower cost with less risk than the over all market. Come on put your "I have more / better product / and my firm does better / more due dilligence rhetorec where your mouth is!!!    



BPD

BPD: That list is about 92-94% “correlated”. Yep, that gets you to a “diversification trip”. BTW, did you see that Wal-Mart is paying 117 Million in a Cal judgement for ? Wait til one of those Cal juries gets their hands on the rev.sharing issue. (As an aside, you only mentioned Am. Funds. Don’t your good jones clients own any putnam?)

I mis-spoke. The jury award was 172 mill. OF COURSE they (WMT) are appealing. Cal will tie the jones boys up in court for YEARS.

[quote=BigPayDay]Ex,

So because I build a diversified American Funds Mutual Fund portfolio of say: 20% American High Yield Tax Free, 20% Capital Income Builder, 20% American Mutual, 20% Capital World Growth and Income and 20% Growth fund of America I haved screwed my clients? Who's brainwashed? At least I can sleep at night. You say that Jones' preferred fund families aren't very good across different asset classes. Show me different funds for the asset classes I mentioned above that have had better net returns (Isn't that what we are trying to provide to our clients?), lower turn over (Lower tax liability), lower cost with less risk than the over all market. Come on put your "I have more / better product / and my firm does better / more due dilligence rhetorec where your mouth is!!!!    

BPD [/quote]

Like I said 7 or 8 posts ago.  American Funds for everyone.  That's what you call diversification?  What's the overlap in that portfolio?  Were you running Putnam hypos in 98 and 99 with using your rear view mirror fund selection methodology?  Why don't you answer my questions before you applaud yourself(another habit you probably picked up at Jones).  And, are you a GP?

BigPayDay.........you call 38% Big Pay?  And you still pay out of pocket expenses, like Phone, Postage, Advertising..etc...?  And this is a good deal how? 

The amazing thing is many Firms are downsizing and they are aware of the fact there are just too many Advisor's out there. They are all drinking the same Kool Aid, Weddle is just a clone of Doug "3 Mil" Hill although he does have a lot more class thats for sure.  

However, Jones keep stating they want market share, 25,000 IR's, what they really want is a Jones Office every 2 miles, young hard working door knocking IR's doing about 200 to 300K Gross commissions, causing no problems, drinking the Kool Aid sounding the company montra........................... 

They really don't care if an IR leaves, they will just send in several newbie Ir's to keep the scraps and start over..........only with two offices instead of one..........it's called multiplication the Jones way

When was the last time Jones went after an experienced IR that leaves..........they don't and can't afford too...........they only go after the training expenses in the first 3 years......so if you have over 3 years and can produce over 250K you need to think about leaving...........sooner than later....... 

BigPayDay, What say you?

Well, because I'm bored and am offically on vacation today I ran a morningstar report of the American Funds that BPD proposed as a diversfied portfolio, using 10K invested into each fund.

12.9% is concentrated in the top 25 stocks

Microsoft, Citigroup, Fannie Mae, Freddie Mac are all in 4 of the funds.  Growth fund, Cap inc bldr, Cap world growth, American Mutual

The rest of the top 25 are all in three funds  generally Growth fund, Cap inc blr and Cap G&I or American fund.

Appoximate allocations  Cash 10.4% -Us Stocks 41.2 - Non US Stocks 24.7% - Bonds 22%     My program only allows me to create Morningstar hypos on an existing account.  I'm too cheap to pay for the full Morningstar Advisor platform   so I used an account that also had minimal (less than $100) stock position and a very small Franklin Natural Resources fund, which has a 33.28 % ytd total return.    There may be some skewing because of this but not much since the existing account is so small

3 year Alpha 5.15  Beta .65

Standard deviation is 6.94 compared to the benchmark (S&P) at 10.01    Sharpe Ratio 1.68 compared to 1.01

pre tax return   3 mo 1.84  1 yr 10.20  3 yr 14.14   5 yr 7.97   10 yr 10.92

Benchmark       3 mo 2.87  1 yr 8.44  3 yr 12.09  5 yr .64  10 yr 9.28

Not too bad. Most clients wouldn't kick you in the shins if this was their portfolio.  One point I may make is that I AM able to run a Morningstar hypo at all.... something I couldn't do at Jones.  Plus I can print it out in a full color format, place it into a folder with other information and analysis of their stock holdings using S&P reports and Morningstar with my recommendations in writing.  The clients are impressed

Babbling- I use instant x ray with all my clients. I think it is a wonderful tool. I hope you have a great holiday season. I think the point about overlap at American Funds is a valid one. I tend to diversify my book just as I advocate my clients to do. No one fund family has all the best answers or all the best performance…

I hardly think 12.9% in the top 25 stocks(roughly 0.5% per stock) is a concentrated portfolio.

In fact, there are some in this forum who would likely argue that performance on a portfolio is often dliuted because of overdiversification...

I hardly think 12.9% in the top 25 stocks(roughly 0.5% per stock) is a concentrated portfolio.

Me either.  I just posted the Morningstar results and let the chips fall where they may.  I use American funds among others.  Each fund family and fund manager has different styles.   Unfortunately for the commission brokers, we are all under the gun about breakpoints and B shares are being phased out.  So if you have a particular client in American funds or any other loaded fund family and you want to diversify them you don't have many choices other than to try to do it within the fund family or face the wrath of the compliance department.

This is why fee advisory businesss and wrap accounts have become (at least to me) more attractive.  You can do the right thing for the client and not have to worry about the breakpoint rules that are handcuffing us to fund families that may not provide ALL the best choices.

In fact, there are some in this forum who would likely argue that performance on a portfolio is often dliuted because of overdiversification

I agree with this too.  Pigeonholing portfolios on a "magic" allocation formula is the easy way out.  Each person's goals and risk tolerance are different.....so should be their portfolios.  

Sonny,

Excluding BPD, most Jones brokers probably have more than one fund family employed in their own 401k acct, and with their other money.  We all see the value of diff managment styles as seen by our own choices in our own accts.  Of course we buy funds at NAV, but certainly a client would be willing to pay for the benefit of that kind of diversification if given the choice.

As for your 73 year old client, I think your right.  Unless the client is going to hit a large breakpoint he may never break even on cost given his age.  Personally I would use the C share.  I just dont trust that a fund company wouldn't change the rules on waiving the cdsc at death.  I've noticed that some of them won't do it in a trust acct anymore.  Do they consider an IRA a trust? 

Questions for the Jonesers:

Assuming your income and support(home office and local) are the same(ceteris paribus):

Are you a better advisor at Jones than you would be elsewhere?

If you really think A shares and breakpoints are the only answer when it comes to buying mutual funds, is there any reason you couldn't do that at another firm?

Is it the firm or the broker that delivers what is right for each client?

Do you feel that the Jones "moral authority" protects your clients from you in a way they wouldn't be protected at another firm.

It seem like when the heat gets turned up on this forum, most of the Jones folks crawl into a hole until it cools off.  Any of you got the guts to look at yourselves and answer these questions honestly?

After all isn't Jones just another brokerage firm or is it really "special" as so many there claim?  Make your case......if you can.