Currently an Edward Jones client and need some advice

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crssherman1990
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Currently an Edward Jones client and need some advice

Post by crssherman1990 »

Last year I opened an account with Edward Jones with $50,000. I was very new to investing and didn't really know what I was doing. The advisor put me in their Advising Solutions program. At the time he explained it and it all seemed to make sense so I went with that. Over the past year I have done quite a bit of research on my own and feel a little more educated on the subject. Today I went in to for my yearly appointment. Something came up and I'm not sure if I'm thinking it's a bigger than it really is. The advisor said the Edward Jones is not legally obligated to act as a feduciary. Once he brought that up I asked him about the revenue sharing agreements with some of the funds they put me in. I asked him is edward Jones isn't required to act in their clients best interest and they have me in funds where they get a kickback, how do I know the only reason I'm in those funds isn't because of the kickback they get and that they aren't required to act in my best interest. All he said was he doesn't know and I'd have to call some other guy. So I don't know if I'm misunderstanding this or making this to big of a deal. But to me this sounds like a huge unethical issue. Any comments or point of views on this are welcome.
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oldcomputerguy
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Re: Currently an Edward Jones client and need some advice

Post by oldcomputerguy »

What sort of fees are they charging? Did they put you into any load funds?
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retiredjg
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Re: Currently an Edward Jones client and need some advice

Post by retiredjg »

It's true. They have no fiduciary responsibility to you. There are/were some standards that are/were going into effect for retirement accounts (not other accounts) this spring, but I'm not sure of the status of that currently.

This is also true of most of the big names in wealth management. It's surprising....as you found out.

I don't think you are making too big a deal about it. It's your money. There are people out there who do operate with a fiduciary standard. If that is what you want, you need to ask that question. It's a shame that is even a question that you have to ask.
radiowave
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Re: Currently an Edward Jones client and need some advice

Post by radiowave »

Welcome to the forum.

The easy answer is move your investments to a reputable low cost brokerage such as Vanguard, Fidelity or Schwab.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
NotWhoYouThink
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Re: Currently an Edward Jones client and need some advice

Post by NotWhoYouThink »

Your advisor is a salesman, like the guy at the Lexus dealer or the jewelry store. He is not a fiduciary.

The good news is you have come to the right place here. You need to figure out where to move your money, then do it. (In that order.) Did you have a question?
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Raybo
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Re: Currently an Edward Jones client and need some advice

Post by Raybo »

Edward Jones is only acting in your best interest to the point where they want to keep you as a client. That is, they can only shave money off your account to the extent that you will let them. The more agreeable you are, the more they will shave off (in my view).

The only way to avoid the "shave off" is to get your money out of Edward Jones and over to some place with low-cost index funds and do the investing yourself. If you don't feel comfortable doing that, then hire a by-the-hour advisor or make more extensive use of the knowledge on this site.

Remember, it is your money and it is up to you to make the most of it!
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Re: Currently an Edward Jones client and need some advice

Post by RadAudit »

Welcome to the forum.
crssherman1990 wrote:The advisor said the Edward Jones is not legally obligated to act as a feduciary. Once he brought that up I asked him about the revenue sharing agreements with some of the funds they put me in. I asked him is edward Jones isn't required to act in their clients best interest and they have me in funds where they get a kickback, how do I know the only reason I'm in those funds isn't because of the kickback they get and that they aren't required to act in my best interest.
Excellent question!! While we can't know for sure (Ha!), there may be a few telltale signs. Did the funds have an upfront fee - sales commission? Do the funds have an exit fee - 12b (?). Is the expense ratio on the funds higher than 1%? What's the annual turnover of the funds? Are the funds active or passive? Are the advisory fees higher than 0.5% vs 1%? Passive is better. Low turnover is better. No upfront fees are better. No exit fees are better. Low ERs are better. (Think closer to 0.05% vs 1%) Low cost, broad based, cap weighted index funds are better.
Last edited by RadAudit on Tue Feb 14, 2017 7:31 pm, edited 5 times in total.
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blueblock
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Re: Currently an Edward Jones client and need some advice

Post by blueblock »

Never mind the kickbacks, here's the Edward Jones Advisory Solutions fee schedule: https://www.edwardjones.com/images/advi ... f-fees.pdf

You're paying 1.35% of your $50K—$675 annually, year in, year out, regardless of what the market does—for your advisor not to represent your best interests.
STINGRAY75
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Re: Currently an Edward Jones client and need some advice

Post by STINGRAY75 »

You've already paid the front load charges so there's no unringing that bell. Going forward, your account will have a 1.35% bleed that you can manage and by that, I mean steer clear of. You'll be better off at Vanguard or Fidelity.
SleepKing
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Re: Currently an Edward Jones client and need some advice

Post by SleepKing »

Vanguard or fidelity are good brokerages to look into. They will walk you through and get you out of that disaster. Wont even have to call your advisor to break up. Lesson learned early on. Congrats on joing bogleheads.
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EyeYield
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Re: Currently an Edward Jones client and need some advice

Post by EyeYield »

The advisor said the Edward Jones is not legally obligated to act as a feduciary. Once he brought that up I asked him about the revenue sharing agreements with some of the funds they put me in.
I'm surprised that he told you Edward Jones is not legally obligated to act as a fiduciary. Was there a law passed that they are now legally obligated to tell you that they aren't legally obligated?

Where did you get the term "revenue sharing agreements"? Was it from Edward Jones? Did they actually tell you that they were putting you in funds that they have revenue sharing agreements with?

Would you list the ticker symbols of the funds you own at Edward Jones, so we can look up the fees associated with them?

That way we can show you how much you're paying in addition to the 1.35%.

Even without knowing more info, the best advice you'll get here is RUN!
"The stock market is a giant distraction from the business of investing." - Jack Bogle
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ether161
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Re: Currently an Edward Jones client and need some advice

Post by ether161 »

Think about it like this.
If your investments gained 7% last year and your expense ratio is 1%,
that mean 14% (1/7) of your profit is lost to your financial advisor.

They take as much as the government!

Cut out the middle man and keep the money you earned.
Topic Author
crssherman1990
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Re: Currently an Edward Jones client and need some advice

Post by crssherman1990 »

oldcomputerguy wrote:What sort of fees are they charging? Did they put you into any load funds?
They are no load funds. The fees total 1.94% annually
Topic Author
crssherman1990
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Re: Currently an Edward Jones client and need some advice

Post by crssherman1990 »

Excellent question!! While we can't know for sure (Ha!), there may be a few telltale signs. Did the funds have an upfront fee - sales commission? Do the funds have an exit fee - 12b (?). Is the expense ratio on the funds higher than 1%? What's the annual turnover of the funds? Are the funds active or passive? Are the advisory fees higher than 0.5% vs 1%? Passive is better. Low turnover is better. No upfront fees are better. No exit fees are better. Low ERs are better. (Think closer to 0.05% vs 1%) Low cost, broad based, cap weighted index funds are better.
They are no load and the fees total 1.94% annually. Honestly I have no idea about exit fees. I didn't think to ask that when I first opened the account. The weighted average expense ratios for all the funds is .5%, but that's included in the 1.94%.
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crssherman1990
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Re: Currently an Edward Jones client and need some advice

Post by crssherman1990 »

I'm surprised that he told you Edward Jones is not legally obligated to act as a fiduciary. Was there a law passed that they are now legally obligated to tell you that they aren't legally obligated?

Where did you get the term "revenue sharing agreements"? Was it from Edward Jones? Did they actually tell you that they were putting you in funds that they have revenue sharing agreements with?

Would you list the ticker symbols of the funds you own at Edward Jones, so we can look up the fees associated with them?

That way we can show you how much you're paying in addition to the 1.35%.

Even without knowing more info, the best advice you'll get here is RUN!
Him telling me they weren't a feduciary wasn't voluntary. Somehow it came up through another question I asked him, but I can't remember exactly how. I don't believe he was legally obligated to tell me though.
I found the term revenue sharing agreement while doing research online. Then looked to see is edward Jones does that. It turned out they have these agreements with about 5 funds I'm in. They did not tell me though until I specifically asked about it today though.
In addition to the 1.35% I'm paying a weighted average expense ratio of .5% and .09% administrative fee.
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Alexa9
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Re: Currently an Edward Jones client and need some advice

Post by Alexa9 »

Fees on a Vanguard Total Stock Market Fund .05% < That's all you pay. That's $500 per year per $1 million invested.
Novine
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Re: Currently an Edward Jones client and need some advice

Post by Novine »

"Currently an Edward Jones client and need some advice"

Run. They've already told you that they're not legally required to put your financial interests above theirs. They've already told you that they'll charge you 10 times what you would pay if you were invested in low-cost, passive index funds at Fidelity or Vanguard. You'll pay a fee when you leave because EJ gets you coming and going. But you'll make that up in no time in what you won't be paying to them in the future.
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Re: Currently an Edward Jones client and need some advice

Post by JW-Retired »

crssherman1990 wrote: In addition to the 1.35% I'm paying a weighted average expense ratio of .5% and .09% administrative fee.
OK, making the (optimistic) assumption there are no other fees of any kind, you are paying an all-up 1.94% of your portfolio as a yearly investment expense. The easiest way to see that little 1.94% expense is investing madness is to compare it to the "safe" portfolio draw-down rate determined in the classic 1994 William P. Begen paper "Determining withdrawal Rates Using Historical Data". He found for a range of AA's and using historical stock/bond returns from 1926 to 1994, that up to a 4% (inflation indexed) withdrawal rate the study portfolios had never run out of money over any 30 year retirement period. Hence the now very well known "safe 4%" retirement portfolio withdrawal rate. Maybe your EJ guy might even have mentioned it? What he won't mention is the Begen safe 4% number referred to the total annual money taken out of the portfolio, including any/all expenses.

That means the safe 4% retirement amount in your case is EJ and the funds get 1.94% off the top, and you are left to live on 2.06%. If that isn't serious madness what would be? :oops:
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sco
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Re: Currently an Edward Jones client and need some advice

Post by sco »

So what is your account worth today?

What month did you put that 50k in?


That will likely tell you as much as you need to know...

Their fee's will ensure that they make as much or more money than you.. Remember those fees come out each and every year, whether you have made money or not... Then the front load fees, they come out before you even purchase the security..
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David Jay
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Re: Currently an Edward Jones client and need some advice

Post by David Jay »

^ ^ ^ ^ (thread title)

RUN !!!
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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greg24
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Re: Currently an Edward Jones client and need some advice

Post by greg24 »

I think it would be an excellent idea for you to leave Edward Jones.

For comparison, your annual fees of 1.94% are in the same ballpark of the SEC yield of the Vanguard Total Bond Market fund at 2.39%. If you have some bond holdings with EJ, you may have a return of roughly zero.
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Pretzel lover
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Re: Currently an Edward Jones client and need some advice

Post by Pretzel lover »

Best investment at EJ = $95 account closing fee
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hand
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Re: Currently an Edward Jones client and need some advice

Post by hand »

crssherman1990 wrote: I asked him is edward Jones isn't required to act in their clients best interest and they have me in funds where they get a kickback, how do I know the only reason I'm in those funds isn't because of the kickback they get and that they aren't required to act in my best interest. All he said was he doesn't know and I'd have to call some other guy. So I don't know if I'm misunderstanding this or making this to big of a deal. But to me this sounds like a huge unethical issue. Any comments or point of views on this are welcome.
You're not misunderstanding, and this is a huge ethical issue. As it turns out, once you get past the marketing, many in the financial services industry care more about themselves than you.

More to the point, this setup takes money from your pocket, and is relatively easy to remedy by moving to a low cost provider whose interests are better aligned with your needs.

The good news is that you learned your lesson early on in your investing career and can correct at minimal cost... many never learn and lose significant dollars to salespeople who they mistakenly trust.
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Re: Currently an Edward Jones client and need some advice

Post by White Coat Investor »

crssherman1990 wrote:Last year I opened an account with Edward Jones with $50,000. I was very new to investing and didn't really know what I was doing.
Ooops! No biggie though. Most of us have done something similar. At least you learned your lesson early with a relatively small amount of money. The 6% loads, a year of high ERs, and a few capital gains taxes (hopefully) is only going to cost you something like $3-4K. Cheap tuition in the school of hard knocks. Could be much worse. You could have bought a whole life policy with an annual premium of $50K.
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Re: Currently an Edward Jones client and need some advice

Post by Good Listener »

White Coat Investor wrote:
crssherman1990 wrote:Last year I opened an account with Edward Jones with $50,000. I was very new to investing and didn't really know what I was doing.
Ooops! No biggie though. Most of us have done something similar. At least you learned your lesson early with a relatively small amount of money. The 6% loads, a year of high ERs, and a few capital gains taxes (hopefully) is only going to cost you something like $3-4K. Cheap tuition in the school of hard knocks. Could be much worse. You could have bought a whole life policy with an annual premium of $50K.
Listen to this man !!! You got a very cheap lesson. Imagine if you had a million with them and they bled you out at 20k per year plus loads.
Topic Author
crssherman1990
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Re: Currently an Edward Jones client and need some advice

Post by crssherman1990 »

Pretzel lover wrote:Best investment at EJ = $95 account closing fee
Is that per find they have me in? Or just for the whole account ? They failed to mention that part when I signed up unsurprisingly. They have me in 13 finds I believe.
inbox788
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Re: Currently an Edward Jones client and need some advice

Post by inbox788 »

David Jay wrote:^ ^ ^ ^ (thread title)

RUN !!!
LOL (but I agree!)

Here's a recent update to the DOL fiduciary rule provided for information only. Please do not discuss unacceptable topics. ( rules#section-4 )

FEB 3, 2017 @ 05:43 PM
Trump Signs Memorandum Shelving Fiduciary Standard For Financial Advisors
http://www.forbes.com/sites/jamiehopkin ... -advisors/

http://www.investopedia.com/updates/dol-fiduciary-rule/
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Pretzel lover
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Re: Currently an Edward Jones client and need some advice

Post by Pretzel lover »

crssherman1990 wrote:
Pretzel lover wrote:Best investment at EJ = $95 account closing fee
Is that per find they have me in? Or just for the whole account ? They failed to mention that part when I signed up unsurprisingly. They have me in 13 finds I believe.
Per account
redrocker
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Re: Currently an Edward Jones client and need some advice

Post by redrocker »

crssherman1990 wrote:All he said was he doesn't know and I'd have to call some other guy. So I don't know if I'm misunderstanding this or making this to big of a deal. But to me this sounds like a huge unethical issue. Any comments or point of views on this are welcome.
As a former Edward Jones customer myself, (who may have gotten burned worse than you since I *did* pay front load fees) here's my advice:

1) avoid further contact with your EJ advisor
2) decide if (a) you are comfortable managing this on your own, doing research/reading as necessary or if (b) you are the type who prefers hand holding. If (b) you need to find a fee-only advisor, interview a couple and get your money transferred. If (a), then
3) choose a brokerage company. Vanguard is obviously popular here but Fidelity is gaining some ground due to reports of better phone and document service. I use both, personally.
4) call the company you choose, explain you want to transfer your account to them. They will guide you through the process.
5) whoever you choose, I suspect your holdings will have been liquidated. Don't rush to invest them until you've at least read Bernstein's If You Can (free download found here on the forum) and either a Bogle or Boglehead book on index investing.

There is no need to involve your current advisor in this. He has likely been trained in persuasive techniques to confuse you or at the very least make you hesitate (my experience with advisors is that fear is the #1 product that they sell). The longer the money stays in EJs clutches, the more money they make and the more likely that your inertia prevents you from ever making a move so he has a financial incentive to throw everything including the kitchen sink at you to get you to stay.
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David Jay
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Re: Currently an Edward Jones client and need some advice

Post by David Jay »

White Coat Investor wrote:
crssherman1990 wrote:Last year I opened an account with Edward Jones with $50,000. I was very new to investing and didn't really know what I was doing.
Ooops! No biggie though. Most of us have done something similar. At least you learned your lesson early with a relatively small amount of money. The 6% loads, a year of high ERs, and a few capital gains taxes (hopefully) is only going to cost you something like $3-4K. Cheap tuition in the school of hard knocks. Could be much worse. You could have bought a whole life policy with an annual premium of $50K.
+1
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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greg24
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Re: Currently an Edward Jones client and need some advice

Post by greg24 »

13 funds for less than $50k? Jiminy.
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Re: Currently an Edward Jones client and need some advice

Post by finite_difference »

Question: Currently an Edward Jones client and need advice.

Pattern: * [edward jones] * advice *.

Advice: Ditch Edward Jones and go with a quality low-cost provider like Vanguard of Fidelity and implement the Taylor Larimore 3-fund portfolio.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
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BL
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Re: Currently an Edward Jones client and need some advice

Post by BL »

Search these threads for Edward Jones or EJ, etc, for other folks who suffered even longer.

Read Getting Started in Wiki and here is a little pdf to get you started:
https://www.etf.com/docs/IfYouCan.pdf
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