E. Jones Wants to Manage My Assets?

[Guest]

This is probably somewhat off-topic and if so the mods should delete it.

Some of you are registered reps or have worked at wire houses.

My Edward Jones broker is suggesting that I sell two of my fairly well allocated/diversified A-share fund families (Templeton and Goldman) and put the proceeds (about $100k give or take) into a (Jones run) managed account. They want 1.3% a year as a fee.

OK, the funds have taken a pounding, but so have all funds. When the market comes back, the funds will come back (the rising tide lifting all ships, etc.) Broker claims I'll "bounce back" faster in a managed account than by just waiting for the funds to rise with the general market.

I'm not asking if this is a good idea or not as no one can say for sure (unless they know the future!)

My question is this: What exactly does my broker have to gain from me doing that? Why is he suggesting I do this... from his point of view (i.e. gain or loss.) What does he get out of this deal, since he is giving up "control" of the assets to another group of brokers who will do the balancing, trading, etc. (at no added cost to me, I'm told.)

 

[CHUMPS FROM OXFORD]

De he say this was part of their "MAP" program?

 

[DHK]

What's he getting? How about an ongoing fee against your assets regardless of the performance.

If performance improves, he makes money as your account grows.

If performance is stagnant, he still makes money.

I'd strongly consider WHY the move is truly in YOUR best interest. I wouldn't think it would be.

 

[Guest]

De he say this was part of their "MAP" program?

It is called "Edward Jones Advisory Solutions Balanced Growth and Income." I've not looked over the prospectus yet. Thought I'd ask here first before spending the time.

I don't have a lot of assets in the market and am not that knowledgeable about it.
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What's he getting? How about an ongoing fee against your assets regardless of the performance.

If performance improves, he makes money as your account grows.

If performance is stagnant, he still makes money.

I'd strongly consider WHY the move is truly in YOUR best interest. I wouldn't think it would be.

Well, the fee is 1.3% and I would assume the biggest chunk of it would go to the team of brokers who actually manage the account. He is not on that team. He tells me that this program was recently made available to smaller accounts like mine. Out of 1.3% maybe the broker would get a quarter of a point a year? Big deal.

I don't see the concept of a managed account myself, but I ask because I don't have a particularly strong grasp on equities.

I've always been a lender, not an owner. I like muni bonds, treasuries, etc. All you have to deal with are interest rates... not the endless variables of a market.... and if you live long enough (or they are called) you eventually get your principal back. Simple investment for a simple mind like mine.

Thanks for the help.

 

[Mr. Bill]

You really need to look at the fee. It is not likely that 1.3% is the complete fee.

 

[Guest]

You really need to look at the fee. It is not likely that 1.3% is the complete fee.

OK. Thanks. I'll ask again, but the guy told me 1.3% and nothing else.

I thought only the super-wealthy have these kinds of accounts. Plain old funds were for the rest of us.

 

[AtlantaLife&Health]

Does he get a commission for moving the money? He's gotta get some kind of commission for having that money in his portfolio, right?

 

[BiggitySwat]

This is probably somewhat off-topic and if so the mods should delete it.

Some of you are registered reps or have worked at wire houses.

My Edward Jones broker is suggesting that I sell two of my fairly well allocated/diversified A-share fund families (Templeton and Goldman) and put the proceeds (about $100k give or take) into a (Jones run) managed account. They want 1.3% a year as a fee.

OK, the funds have taken a pounding, but so have all funds. When the market comes back, the funds will come back (the rising tide lifting all ships, etc.) Broker claims I'll "bounce back" faster in a managed account than by just waiting for the funds to rise with the general market.

I'm not asking if this is a good idea or not as no one can say for sure (unless they know the future!)

My question is this: What exactly does my broker have to gain from me doing that? Why is he suggesting I do this... from his point of view (i.e. gain or loss.) What does he get out of this deal, since he is giving up "control" of the assets to another group of brokers who will do the balancing, trading, etc. (at no added cost to me, I'm told.)

Al,

By moving you from "A" share funds to a fee-based "wrap" account, he will be giving Jones trading authority over your account. In return, he will receive a portion of this wrap fee in exchange for keeping you in the portfolio.

So, basically, you'll be paying him to do little to no management and work (letting his backoffice do it) and it would fall to him to keep you in.

Fee-based "wrap" accounts have nothing wrong with them inherently, but of course this depends on the performance of the money manager. There are some that are good, others terrible - can you get some kind of historical performance report on this type of AUM account?

Your broker would earn a commission by selling your "A" shares, then earn an ongoing asset based fee on your account, whether or not there are gains or losses. This again is fine, if this is what you want - to have 100K exposed to the equities and bond markets.....?

Let me ask you: why are you even with Edward Jones? If you go on the RegisteredRep.com forums, you can read more about why more and more clients are turning to independent advisors versus the "captive" "wirehouse" type financial advisors, typically who have loyalty to their own company and may have conflicts of interest, limited options, and little exposure to investment products outside of their company.

Lastly, though I know for a fact (cause I still have friends with Jones) EJ is not big on alternative nontraded securities, have you asked your broker about exiting the market completely and putting your 100K into a diversified portfolio of nontraded REITs, Timberland, Oil & Gas assets, Leasing, etc? Though these investments have limited liquidity, the returns and safety of capital have been impressive and far superior to most fund based portfolios I've seen.

 

[Guest]

Fee-based "wrap" accounts have nothing wrong with them inherently, but of course this depends on the performance of the money manager. There are some that are good, others terrible - can you get some kind of historical performance report on this type of AUM account?

I was told they will get me the numbers once the latest ones for last quarter are published (or cooked! :-)) I'm hesitant to give anyone discretionary trading power over the account, but it's not a very large account and I assume they have to follow the conservative goals of the program. But like you say, it will all depend on how good the managers are.

Your broker would earn a commission by selling your "A" shares, then earn an ongoing asset based fee on your account, whether or not there are gains or losses. This again is fine, if this is what you want - to have 100K exposed to the equities and bond markets.....?

Well, it's already in two funds, so some exposure is there. I don't mind anyone making money from my account... so long as I am making money. This is why I've never been a big fund guy. The fund gets their management fee no matter how good a job they do. That's crap. It's why I don't like Wall Street because I don't believe it is a level playing field for the small investor. There are more ways for us to lose than to win.

Let me ask you: why are you even with Edward Jones? If you go on the RegisteredRep.com forums, you can read more about why more and more clients are turning to independent advisors versus the "captive" "wirehouse" type financial advisors, typically who have loyalty to their own company and may have conflicts of interest, limited options, and little exposure to investment products outside of their company.

I understand your POV, but I tend to agree with the Jones investment philosophy. They are not perfect by any means, but I have some level of "peace of mind" that when they suggest a fund or a stock that it has been "vetted" by people who are honest and who follow the Jones paradigm of safe, secure, holdings.

Besides, I simply don't know any RIAs in my area whom I feel have the same, conservative approach that I do. The ones I know are all cowboys... who follow the latest hot-pick of the day and who are going to make money on their wrap fees and not actively be looking at what is best for me. I'm sure not all are that way, but those are the ones that I know here... or who are probably more suited to a younger, less risk-adverse client than myself.

Besides, there are hardly any RIAs who will take a tiny $100K account.

Lastly, though I know for a fact (cause I still have friends with Jones) EJ is not big on alternative nontraded securities, have you asked your broker about exiting the market completely and putting your 100K into a diversified portfolio of nontraded REITs, Timberland, Oil & Gas assets, Leasing, etc?

I have a very low risk-tolerance. I'm not the kind of client who is going to do any speculative investing.

Though these investments have limited liquidity, the returns and safety of capital have been impressive and far superior to most fund based portfolios I've seen.

I'm not doubting you, but everyone has their own "gut" about risk. I will take wild-ass risk that I have some input into. For example I've invested money into business ventures that I ran or helped run or just sat on a board (like a community bank I helped start 25 years ago... still in biz and doing well.) I'm just not your basic riverboat gambler who believes he can beat (or even meet) the market.

For those who can get into bed at night and not have a trembling thought about what might happen to their assets if tomorrow there is a crash, that's great. I'm just not that guy. One of the reasons is that with a disabled wife, I've been a one-earner household for the past 12 years... and that has cut down on my risk level. When Jane was working in the OR as an RN and taking lots of call, she made good money. But that income was replaced by social security... meaning a big cut in household income. But I made some good biz decisions so we've done OK. Don't shed any tears. I simply followed the old-fashioned, get-rich slow method by not taking risks that I could not control. True, I ran or saw some of my business ventures and real estate investments into the dust... but some made a large amount of money.

I'm only 61 so had I lost half my holdings in a 401k bust, I still have plenty of time to MAYBE make it back. But my heart goes out to those who are eight or nine years older than myself who were hoping to retire at 70 or 72. I don't see that happening.

Anyway, thank you for your intelligent and insightful post. I didn't know about the rep board. I will lurk there for awhile. I know a lot about the financial markets and their products (read the WSJ each morning for 30 years and you will too!) and while it is all fascinating, it is just not for me at my age and stage in life.

There used to be a commercial for one of the big wire houses (Paine Weber or Dean Witter?) that showed a wealthy looking guy in front of a big house with an expensive car in the driveway and all he says "How does a guy like me get to be a guy like me?" It then switches to the company logo.

 

[Mr. Bill]

Typical full fees (trading, commissions, etc.) used to start at 2.8% at Merrill, UBS, Smith Barney, the big boys. The reps can discount them down, only to about 2.1% (I think the lowest I've seen is about 1.85%, but that would be on a much higher balance than $100k). It seems like the 1%+ being quoted includes some of the fees, but not all.

On your A shares, the firm receives (most likely) 25 basis points as a trail, all the other fees stay with the asset management company. What are the internals on what you already have? You really need to review this fully.

Then again, why aren't you just doing it yourself?