Edward Jones now discloses revenue sharing arrangements

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mptfan
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Edward Jones now discloses revenue sharing arrangements

Post by mptfan »

As a result of settling a class action lawsuit, Edward Jones now discloses its revenue sharing arrangements with various mutual fund families, and it discloses that it has a potential conflict of interest.

http://www.edwardjones.com/cgi/getHTML. ... aring.html

Of course, they are only doing so after being sued in a class action lawsuit. However, at least they are now making the disclosures, and I think this will be a positive trend in the investment industry towards greater disclosure in general, and in particular regarding revenue sharing arrangements.
BeachPerson
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Stay with Vanguard

Post by BeachPerson »

All the more reason to learn about investments yourself and stay with Vanguard.
From Jack Brennan's "Straight Talk on Investing", page 23 "Living below your means is the ultimate financial strategy"
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mptfan
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Post by mptfan »

"For the year ended Dec. 31, 2006, Edward Jones received approximately $110 million in revenue sharing payments from the preferred fund families as designated throughout 2006. For that same period, Edward Jones' net income was $391 million."
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orthros
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Post by orthros »

mptfan wrote:"For the year ended Dec. 31, 2006, Edward Jones received approximately $110 million in revenue sharing payments from the preferred fund families as designated throughout 2006. For that same period, Edward Jones' net income was $391 million."
Good to know that 30% of EJ's net income came from revenue sharing.

It starkly demonstrates the inherent conflict of interest in such arrangements.

After all, if you're a publicly-traded company and a third of your NI is from such set ups, are you really going to do anything to upset your income stream, even if it's in the best interests of your clients?

I think Bill Bernstein said it best: Brokers service their clients like Bonnie and Clyde serviced banks.
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mptfan
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Post by mptfan »

I became aware of this because my MIL has an account with "the local Edward Jones guy." I was at her house today and I saw the notice on the table with some other mail and I read it. Later, it was not on the table, and I asked her where it was, and she said she threw it away. I asked her if she read it before throwing it away, and she said "no."
jimmyboy
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Post by jimmyboy »

After all, if you're a publicly-traded company and a third of your NI is from such set ups, are you really going to do anything to upset your income stream, even if it's in the best interests of your clients?

They are not a public company. Do your homework. Also, as far as I know, revenue sharing has always been disclosed in the prospectus. I realize this is an index forum, but I've been a client of many firms (Merril and SB) as well as Ed Jones. I have found they absolutely do focus on the client and they have been a tremendous help in my retirement planning.
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mptfan
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Post by mptfan »

jimmyboy wrote: Also, as far as I know, revenue sharing has always been disclosed in the prospectus.
This is incorrect. Edward Jones did not disclose revenue sharing in the prospectus or anywhere else, that is why they were sued, and that is why they agreed to disclose the revenue sharing as part of the class action settlement.
LBMM
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Post by LBMM »

jimmyboy wrote:
After all, if you're a publicly-traded company and a third of your NI is from such set ups, are you really going to do anything to upset your income stream, even if it's in the best interests of your clients?

They are not a public company. Do your homework. Also, as far as I know, revenue sharing has always been disclosed in the prospectus. I realize this is an index forum, but I've been a client of many firms (Merril and SB) as well as Ed Jones. I have found they absolutely do focus on the client and they have been a tremendous help in my retirement planning.
Do you have nothing to add to the forum other than defending EJ?

http://diehards.org/forum/viewtopic.php?t=3865
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ElJay
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Post by ElJay »

For the short time I was with Edward Jones, all they did was zap me with fees. That was their focus. I was put in a Franklin Templeton fund while I was there.
Lilly
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Post by Lilly »

jimmyboy wrote:
I have found they absolutely do focus on the client and they have been a tremendous help in my retirement planning.
You are one of the lucky ones, if you find them to be trememdously helpful. I found out that my EJ rep is a big fat liar. He focuses on how to fill his pocket by telling lies. He didn't get me suckered into his trap. He was quite upset with me. Oh well! I would stay as far away from these people as possible.

Lilly
TimDex
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x

Post by TimDex »

I think it really does depend on the quality of the broker you have.

Edward Jones' ads focus heavily on having "someone to talk to face to face."

Their market is I think people who find investing anxiety-provoking, and want someone to help them. There are a lot of people who simply can't deal with the idea of sending their money in the mail to someone they never met.

Unfortunately, as Lilly notes, you can end up with someone who simply wants to make a sale.

We have a lcoal EJ rep who has been trying to make sales to local charities I've been involved with, and he is more than willing to lie shamelessly to inexperienced people. Of course, he was lying about a Smith Barney rep and the terrible funds that rep put them in originally.

God help us...

Tim
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aisa
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Vanguard Revenue Sharing

Post by aisa »

Greetings, all,

It says on the Vanguard site that they participate in revenue sharing also. Obviously the financial planners sell only Vanguard funds so I am assuming the some of the brokerage 12b-1 fees offset expenses, which could be considered 'revenue sharing'. Is this correct? Anyone know more about this?

Thanks,
Aisa
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tfb
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Re: Vanguard Revenue Sharing

Post by tfb »

aisa wrote:Greetings, all,

It says on the Vanguard site that they participate in revenue sharing also. Obviously the financial planners sell only Vanguard funds so I am assuming the some of the brokerage 12b-1 fees offset expenses, which could be considered 'revenue sharing'. Is this correct? Anyone know more about this?

Thanks,
Aisa
Where exactly on the Vanguard site says they participate in revenue sharing? Depending on the context, it may mean that if you buy a fund with load or 12b-1 fee yourself through VBS, VBS will receive revenue sharing. But nobody at Vanguard is actively trying to sell you a fund with load or 12b-1 fees.
Harry Sit, taking a break from the forums.
HearDoc
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Post by HearDoc »

LBMM sez
Do you have nothing to add to the forum other than defending EJ?

http://diehards.org/forum/viewtopic.php?t=3865
Do you memorize all the threads ? I'm in awe.
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aisa
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Re: Vanguard Revenue Sharing

Post by aisa »

tfb wrote:Where exactly on the Vanguard site says they participate in revenue sharing? Depending on the context, it may mean that if you buy a fund with load or 12b-1 fee yourself through VBS, VBS will receive revenue sharing. But nobody at Vanguard is actively trying to sell you a fund with load or 12b-1 fees.
Here:
http://www.vanguard.com/pdf/revenue_info.pdf

I know that no one at Vanguard is trying to sell a fund with a load or 12b-1 fee. This, as far as I can see, eliminates the conflict of interest issue with revenue sharing which is the case with firms that push 'preferred fund families' that make these payments. But I'm not sure exactly how revenue sharing at Vanguard does work. Where does the revenue go? Back to the funds? In other words, what are the differences between what Edward Jones is doing and what Vanguard is doing, leaving aside that Vanguard planners do not push funds that pay revenue sharing?

Thanks,
Aisa
beancounter
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Post by beancounter »

Lilly wrote:
jimmyboy wrote:
I have found they absolutely do focus on the client and they have been a tremendous help in my retirement planning.
You are one of the lucky ones, if you find them to be trememdously helpful. I found out that my EJ rep is a big fat liar. He focuses on how to fill his pocket by telling lies. He didn't get me suckered into his trap. He was quite upset with me. Oh well! I would stay as far away from these people as possible.

Lilly
I am still suffering from unnecessary loss of money ($over 350K) in 2000-2002 due to the greed of our EJ 'personal representative'. Our EJ 'personal representative' definitely had his financial interests ahead of mine. He had purchased for us 30 stocks and 27 different mutual funds, which he bought and sold often, most of which were aggressive EM (which I unfortunately did not know). I was 95% mostly aggressive stocks/ 5% individual bonds. IMHO this is part of why the size of American Funds have grown so large in the last few years. Too many people, like me, trusted brokers with my hard earned savings unquestioningly. I started trying to learn more about investments when inappropriate 'asset allocation' for my age and excessive churning of our account became so blatant, even to me. I learned about their 'undisclosed revenue sharing' policy on the internet when the lawsuit was filed. Soon after that I read on my statement that I was also being charged 5.25-5.75% load on my reinvested shares! That did it!!! Thank the Lord for finding Vanguard, and this messge board.

Thank you all for taking time to post invaluable information for those of us seeking to improve our basic knowledge of successful investing.
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tfb
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Re: Vanguard Revenue Sharing

Post by tfb »

aisa wrote:Here:
http://www.vanguard.com/pdf/revenue_info.pdf

I know that no one at Vanguard is trying to sell a fund with a load or 12b-1 fee. This, as far as I can see, eliminates the conflict of interest issue with revenue sharing which is the case with firms that push 'preferred fund families' that make these payments. But I'm not sure exactly how revenue sharing at Vanguard does work. Where does the revenue go? Back to the funds? In other words, what are the differences between what Edward Jones is doing and what Vanguard is doing, leaving aside that Vanguard planners do not push funds that pay revenue sharing?

Thanks,
Aisa
That document refers to Vanguard Brokerage Service (VBS). If you only invest in Vanguard funds, you don't have a VBS account and the entire document does not apply to you. In VBS, you can buy funds run by other companies. The NTF funds have revenue sharing. That's how VBS can offer them without transaction fee. You can also voluntarily buy a load fund. VBS will receive the commission from that purchase. In that regard VBS is not much different from what other brokers do. The revenue sharing revenue received by VBS offsets its operating costs.
Harry Sit, taking a break from the forums.
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