Edward Jones, American Funds, Fiduciary Rule changes

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pollywog75
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Edward Jones, American Funds, Fiduciary Rule changes

Post by pollywog75 »

Hello,

I am new to investing and very limited knowledge (40 yo, currently stay-at home mom). When I left my last job about 5 years ago, I was required to rollover my ESOP into an IRA, which I did with Edward Jones. I invested about $200k into American Funds with an upfront load of about 3 - 3.5% ( I don't have the info in front of me).

I received a call from my advisor today, as others have on this forum, saying that with the new Fiduciary Rule my current Am Funds will be essentially frozen (my words) and "grandfathered" in but I can no longer make changes to it or add to it after Fri. He advised that I roll the entire portfolio into a fee-based one called Guided Solutions before Fri's rule change.

I felt disappointed that the services I paid for with the upfront fees of the Am Funds will no longer be honored, such as a no-fee asset allocation changes. I initially decided to go with these A shares thinking I wouldn't have to pay anymore fees on my investments. Now the Guided Solutions portfolio Edward Jones is offering will have a 1.35% monthly fee, which looks ugly based on other posts in this forum.

Should I just let my portfolio sit as-is for the next 10-15 years or move it into a new IRA with another company and lose out on the upfront fees I paid 5 years ago? Thanks for your time & talents!
Avo
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by Avo »

Welcome to the forum.

Your upfront fees are gone. I'm sorry to say that they bought you nothing of value. You are continuing to pay overly high expense ratios on the funds themselves.

I would transfer the whole thing in-kind to Vanguard or Fidelity (not sure which would be easier or cheaper for liquidating the Am funds), and switch to low-cost index funds. You can easily rebalance yourself once a year (or more often if you like, but there is little benefit).
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Taylor Larimore
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by Taylor Larimore »

pollywog75:

Welcome to the Bogleheads Forum!

The Fiduciary Rule, which requires putting the investor interests first, has hit Edward Jones hard. You can read more about Edward Jones here:

http://kronstantinople.blogspot.com/p/e ... -saga.html

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
PFInterest
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by PFInterest »

Don't let it sit. Yes move. Call vanguard.
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David Jay
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by David Jay »

If you are willing to manage your own account (with the help of this forum) then either Vanguard or Fidelity will not charge you any account management fees. The fund expenses will be lower than your American funds. Waiting to move will just cost you money.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Hug401k
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by Hug401k »

The advice from Avo is good. Do not use that expensive managed account they recommended. They are charging you too much for that service. Some company's charge .3-.4% for a similar product and even that you don't need. Roll that IRA to Fidelity or Vanguard. I've only rolled accounts to Fidelity and they are pretty good at making it as easy as possible. I can't speak for Vanguard. Choose a few of their index funds often recommended on this board- some stocks, some international, and maybe a bond index. Never pay those ridiculous fees again and consider it a lesson learned. The good news is that even though you paid that 3% load, you did do a lot of right things too that many people don't do. You saved $200k. You didn't cash out the ESOP. You aren't cashing out the IRA. You aren't enrolling in that expensive managed account and you won't be paying a 3% fee to anyone anymore. Plus, you learned that you are now too well informed to pay Edward Jones prices. That might call for a congratulations! ~From a fellow 40ish mom :)
krow36
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by krow36 »

Find out how much it would cost to sell your American Funds at EJ. Then call up Vanguard or Fidelity and find out how much they would charge to sell your AF funds if you moved them there "in kind". Sell where it's cheapest. AF funds are above average managed funds but their front-end load results in rejection by BH's. Their expense ratios are about 4 times as high as those of index funds at Vanguard, Fidelity or Schwab. Your decision. :happy
DippityDoo
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by DippityDoo »

pollywog75 wrote:
I received a call from my advisor today... I can no longer make changes to it or add to it after Fri. He advised that I roll the entire portfolio into a fee-based one called Guided Solutions before Fri's rule change.
Hi, Pollywog. Your advisor gave you three whole days before the change to make up your mind? What a lousy way to treat a customer! I left EJ for Fidelity last month. I tried moving to Vanguard but got a runaround and finally gave up. Fidelity did all the legwork transferring the account, making it very easy on me. They also offered to reimburse EJ's account closure fees. If I were in your shoes, I would make it priority #1 to decide on a new brokerage. Priority #2 would be the immediate transfer of assets to the new brokerage. As others have said, you're out the load fees. But when you shed the American Funds, you'll stop paying 12b1 fees. And you'll have access to funds with much lower expense ratios than American Funds. I don't know whether Vanguard charges to sell funds that transfer in. So far I've had no charges from Fidelity.

I'm very glad you found your way to this forum. You'll get good advice here.
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Bogle_Feet
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by Bogle_Feet »

pollywog75 wrote:He advised that I roll the entire portfolio into a fee-based one called Guided Solutions before Fri's rule change.
LOL! And it's not even fee-ONLY. It's fee-BASED, meaning that EJ is still legally allowed to earn backdoor commissions AKA double dipping. The financial services industry is such a big racket. Just move everything to AmeriTrade or E Trade and DIY. The sooner you realize that investing is simple (a total stock index fund and a total bond index fund) the sooner you realize that you are just throwing away money to "advisors" AKA salesmen.

I'm curious what you think the job of an advisor is? Why do you pay them so much?

BTW the fiduciary rule does not go far enough. It helps but it will not protect you from conflicts of interest -- Example being sold annuities that pay back door commissions in the 3 - 4% range.
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pollywog75
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by pollywog75 »

Wow, thanks for all the responses! I am so happy to find this forum. It sounds pretty clear to bail on EJ and sooner than later. I guess I have some work ahead of me now.
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pollywog75
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by pollywog75 »

Bogle_Feet wrote: I'm curious what you think the job of an advisor is? Why do you pay them so much?
Honestly I never even thought about it before. I just assumed it came with the territory since this has been my 1 and only investment (steep learning curve). :(
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BL
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by BL »

I suggest you do one of these:

Contact Vanguard PAS and decide if you want them to do the work at AUM of 0.3%.

Contact V or Fidelity to arrange transferring to them. Simplest would be a Target Date fund such as V Target Date or Fidelity Target INDEX fund with the desired % bonds. V has other low cost single funds such as Life Strategy, Balanced Fund, and several others.

Read up on the 3-fund portfolio and buy all three funds. See Wiki or Boglehead's Guide to Investing book. Or read this pdf for a brief overview: https://www.etf.com/docs/IfYouCan.pdf
(be sure to read Hurdle #5 regarding advisers.)
Avo
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by Avo »

Or, just do this: "age in bonds": 40% in a total bond market index fund (FSITX at Fidelity or VBTLX at Vanguard) and 60% in a total stock market index (FSTVX at Fidelity or VTSAX at Vanguard). I have listed the ticker symbols of the "premium" class (at Fideltiy) or "admiral" class (at Vanguard) funds, which have the lowest expense ratios, and which have $10K minimums.

Then, later, you can decide if you want some of your stock in international (30% of stock seems to the median recommendation), or want to adjust your stock/bond ratio to be more aggressive or less. Or whether you want to add some bells and whistles. But it's really not necessary.

That's it. You're done.
Bodhi312
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by Bodhi312 »

Fidelity offers American Funds (F1 shares - no load/no transaction fee). If you'd like to keep your shares and add or rebalance, I would think you could do a share class conversion if you move your shares in kind. I've never owned American Funds, but they've always seemed fine to me (especially with no load/no transaction fee).
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goingup
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by goingup »

^ I have wondered why EJ doesn't offer to transition its American Funds holders into the new share class. Many EJ clients are rather fond of American Funds but EJ seems to have just dumped AF after years of selling them.
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Taylor Larimore
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by Taylor Larimore »

goingup wrote:^ I have wondered why EJ doesn't offer to transition its American Funds holders into the new share class.
goingup:

My guess is that American Funds will no long pay Edward Jones to sell their mutual funds. This article explains: Edward Jones Really Likes Those Fees.

Best wishes.
Taylor
Last edited by Taylor Larimore on Wed Jun 07, 2017 9:56 am, edited 1 time in total.
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by jebmke »

Taylor Larimore wrote:
goingup wrote:^ I have wondered why EJ doesn't offer to transition its American Funds holders into the new share class.
goingup:

My guess is that American Funds will no long pay Edward Jones to sell their mutual funds.

Best wishes.
Taylor
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BlackStrat
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by BlackStrat »

Taylor Larimore wrote:You can read more about Edward Jones here:
http://kronstantinople.blogspot.com/p/e ... -saga.html
That was some read Taylor - frightening what they get away with!

I've forwarded it to some friends
heyyou
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by heyyou »

you could do a share class conversion if you move your shares in kind
As mentioned, it may cost less to transfer the shares, instead of selling them, then transferring the money. Yes, outfits like EJ will charge account closing fees. Seems greedy but that is how they have been all along while managing your savings. That shows that they know that you won't be back.

The good news is when you submit your paperwork to Vanguard or Fidelity, specifying that you want to transfer X shares of each American fund, VG or Fido will then contact EJ to pull out your savings. You do not have to contact EJ. When your EJ rep sees the transfer, he will call you to try to change your mind, since he/she is losing a steady source of income, but you do not have to speak to the rep, the paperwork is sufficient since it has your signature on it. Over the phone is not enough to change it.

Be sure to ask for IRA transfer paperwork from the new place, so your transfer will not be an IRA withdrawal that would be taxed.
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goingup
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by goingup »

Taylor Larimore wrote:
goingup wrote:^ I have wondered why EJ doesn't offer to transition its American Funds holders into the new share class.
goingup:

My guess is that American Funds will no long pay Edward Jones to sell their mutual funds. This article explains: Edward Jones Really Likes Those Fees.

Best wishes.
Taylor
Their self-interest knows no bounds!

Yet, for accounts that are transitioning to an AUM model (I guess that's called Guided Solutions) why couldn't EJ put customers in the American Funds F1 shares? The F1 shares meet the fiduciary standard. I feel like I'm not understanding something here. :confused
ltdmn
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by ltdmn »

When EJ offered to transition us to the Guided Solutions (AUM) they did say they could use a different (Institutional?) class of funds which had no loads and lower annual expenses.
retiredjg
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by retiredjg »

The one thing that must happen right now is for your EJ rep to understand in no uncertain terms that you do not approve moving the money to the Guided Solutions program. Otherwise, it might just happen even if that is not your intention. It may be opt-out instead of opt-in.

You should move your IRA to another custodian and invest it simply in a low cost fund(s) that you understand. Since this is an IRA, there is no tax cost to do that. People here can help you figure out what is a good plan for you if you will also commit to learning some on your own. This is a good place to start. https://www.bogleheads.org/wiki/Getting_started

You will likely pay an account closing fee to EJ to close the IRA. Just do it.

Whether you sell at EF and move cash or move the American Funds to your new location and then sell depends on if there is a cost to sell your funds. This is a question to ask both sides of that transaction.

You don't have to treat this as an emergency. It does not have to be done this week or even this month. But make sure it is done in a timely manner. Two to three months max.

And shame on your "advisor" for dumping this on you at such a late date....unless you just have been ignoring their mail for months.
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by pkcrafter »

pollywog, just to put this change into perspective, with the American funds you paid a one time load, now with the new EJ strategy you would pay an ongoing annual load of up to 1.35%. This is obviously worse for investors than the one time hit.

We are seeing a lot of new posters who don't like EJ's strategy, and I'm going to guess that at some point EJ is going to have to change it. They must be losing a lot of clients now.

Paul
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fiverus
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by fiverus »

I was with EJ for many years until I found this site. Run. I did. I would go with Fidelity or Vanguard.
motovirus96
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by motovirus96 »

pollywog75 wrote: Tue Jun 06, 2017 11:43 pm
Bogle_Feet wrote: I'm curious what you think the job of an advisor is? Why do you pay them so much?
Honestly I never even thought about it before. I just assumed it came with the territory since this has been my 1 and only investment (steep learning curve). :(
When I had some Amerifund Growth Fund Class C shares in Oct. of 2016. I transferred the shares from an Edward Jones Simple account to a Vanguard Traditional IRA. Once the shares showed on my Vanguard Account I sold them and bought Vanguard Total Stock Mkt Index. The Amerifunds had a charge of 1.45% to sell and originally the $500 ish fee was removed from the balance. It must be a fee paid to the broker that institutes the sales order because about a month later I received a letter from Vanguard telling me that they were going to deposit that money back into my traditional IRA and buy Total Stock Market Index with the money. I assumed it was because Vanguard does not make a living from accepting these fees so they just gave me back the money. The money was originally removed by Amerifunds but later sent Vanguard this amount. Not sure if this is what will happen for you but I was pleasantly surprised and was not going to dig into it too much because I was just happy to have the fee money back. Make sure to only do an In-kind transfer and do not sell the Amerifunds Shares until they arrive at Vanguard.
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by JW-Retired »

retiredjg wrote: Wed Jun 07, 2017 12:37 pm And shame on your "advisor" for dumping this on you at such a late date....unless you just have been ignoring their mail for months.
Yes, but we shouldn't forget that this is really a blessing for the OP (polloywog75), since it looks like she will actually wise up and go to a low cost investment Company. The high (2% or so) annual fees the EJ "advisor" was gnawing off her portfolio before were from sales loads and 12b1 fees. Now if she sticks with EJ a similar amount is going to come off from a 1.35% AUM fee and 12b1 fees or something else. The bottom line expense drag won't change much. EJ certainly isn't going to stop making money.

Kudos to the new Fiduciary Rule shaking things up! Otherwise OP would have continued her slumber. :beer
JW
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Dottie57
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by Dottie57 »

Move to either fidelity or vanguard. I had American Funds too, when I moved to fidelity last year. They did not charge me a cent to sell the funds. Ask them what they would charge you. I like the fidelity web site better too.

My 401k is at Fido too.

Good luck.
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BL
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by BL »

Vanguard has mostly low-ER funds and many good balanced funds such as Target date and Life Strategy. They won't lead you into more expensive choices.

If you want an advisor, PAS is 0.3%, but if you go with a balanced fund, you probably don't need an advisor.
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BL
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by BL »

delete
bip2101
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by bip2101 »

I just actually went through the process of transferring my American Fund account to Vanguard. Very easy process that is out lined in this thread --viewtopic.php?f=1&t=224396&p=3467883#p3467883.

I too was going down the path of EJ, but when I researched their fees I was enlightened by this community.
chambers136
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by chambers136 »

Check Schwab as well as Vanguard and Fidelity. I found Schwab could take all of my funds in kind, where Vanguard and Fidelity could only take half of them, which would've caused me to liquidate.
SimplepathtoBogle
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Re: Edward Jones, American Funds, Fiduciary Rule changes

Post by SimplepathtoBogle »

Polywog,

You are not alone. I just went through the same situation with a financial manager (not EJ), but similar American fund with high fees and loads. I think you are lucky they brought this up, because mine didn't. This is your way out. I transferred my shares in kind, but I think you have received good advice to evaluate which option is cheaper. Be prepared for the closing fee and the transfer fee and a bunch of other nickel and dime fees that will be frustrating. It is worth it to get out. My experience was that I decided to study on what I had invested with a friend to try to understand it better as I wanted to start being more aggressive in adding more to the account. Once I read up on the subject, I looked at what I had and it didn't add up. Similar to you, I didn't know what I expected from him or what he really did, I never really thought about it. It is tough enough to pick a fund that outperforms an index fund and it seems even more difficult to pick a financial manager who will pick a fund that will outperform the market, especially if they may be picking funds based on factors that don't benefit you such as how much they make by selling one fund over another. I went with index funds at vanguard. I am happy I found this forum when I did, but wish i could get a couple of do-overs on a few decisions.
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