A Boglehead's Edward Jones Question

[Vanguard Fan 1367]

I am a close friend of someone who has a Fidelity Fund that has done well for him He says that he talked to his Edward Jones rep and is planning to put this 100K with Edward Jones, keeping the Fidelity Fund but in his Edward Jones account.'

Is it likely or possible that he will have to pay 1000 a year as an Asset Under Management Fee with Edward Jones for just this Fidelity Fund?

I don't think that he can afford to pay the 1000 if he retires, which he is thinking about doing.

[retiredjg]

I think it is entirely possible.

[Mr.BB]

He is going to be paying an extra fee with the same fund he has with Fidelity? You better explain the numbers to him and show him his E.J buddy is no friend.

[dbr]

In short, why on earth would he do this?

[sco]

Yes i would expect that they will let him keep this fund (although they will likely try to sell him something else after the funds are there).

Of course there will be a wrap fee 1-1.25%..

No one can afford this, if they are attempting to use the 4% withdraw guideline.

[student]

In general, if it involves EJ, the answer is don't go near it.

[goingup]

Is it likely or possible that he will have to pay 1000 a year as an Asset Under Management Fee with Edward Jones for just this Fidelity Fund?

Both possible and likely that Ed Jones will include that Fidelity Fund in their AUM fee. Your friend should inquire about this prior to transfer.

Think of it from Ed Jones rep's perspective. He'll now include the fund in his advisory advice, include it in reports, and provide the tax information that a brokerage does. All of this isn't free.

[columbia]

In general, if it involves EJ, the answer is don't go near it.

+1000

[Dottie57]

In general, if it involves EJ, the answer is don't go near it.

+1000

Agree. Show your friend this friend. Hope he stays away.

[CardioMD]

In general, if it involves EJ, the answer is don't go near it.

This. He should run, not walk.

I had one approach me about managing my assets. I asked him if he had Vanguard index funds. He spent the next 10 minutes explaining how he can pick better funds and stocks before I finally cut him off and said no thanks. Nice guy though.

[dbr]

I'm curious of the rep is a relative, friend, or acquaintance taking advantage of a relationship. Otherwise it is hard to understand why someone holding a good fund at a good broker would think of moving.

[retiredjg]

Nice guy though.

They are ALL nice guys.

Nice guys make good sales people and that is what Edward Jones hires... sales people. People usually don't buy stuff from mean guys.

[dwickenh]

I'm curious of the rep is a relative, friend, or acquaintance taking advantage of a relationship. Otherwise it is hard to understand why someone holding a good fund at a good broker would think of moving.

This^^^^

[Spinola]

It makes no sense whatsoever...Avoid EJ like Coronavirus.

[Vanguard Fan 1367]

I appreciate everyone's time responding. Other threads talk about the challenge of telling friends and relatives about the magic of no-load low fee index funds. So I will try to tactfully advise him what he is getting into.

[CABob]

Is there an account at EJ other than the 1% AUM type? I can't imagine that his adviser/broker/friend will be providing cost effective service for $1000.

[Sandtrap]

On the other hand:
1. He may really really like his Edward Jones or financial advisor and it's worth paying extra for it.
2. Having certain financial advisors or wealth managers brings a degree of "status" or "bragging power" so that's worth paying for, right?
3. A headstrong attachment to one's own way of doing things, despite higher costs, despite illogical choice of funds, does bring with it some level of personal satisfaction (ego?).

In the above cases, and more, it doing things a certain way makes folks happy, and there's no harm to others in it, then. . . that's a good thing to do for them too.

Actionably: suggest lightly, just once, that there may be better alternatives. After that, say nothing more.

j

[CoastalWinds]

If you are his close friend, presumably he knows you have investing savvy. So wouldn’t it suffice to tell him to avoid EJ like the plague?

[02nz]

EJ's "Guided Solutions" is their answer for those who want to be more self-directed, so yes it's possible. But I don't see why then you'd do that, as the fees are still very high, just not quite as high as the traditional, full advisory "service."

[2retire]

Perhaps you can show them these two web pages. Although they believe their fund has done well for them, and it did to better than average last year, it has been in the bottom half to almost bottom quarter of funds that own the same things as it has over 3, 5, 10, and 15 years; versus the equivalent Vanguard fund that has manged to stay in about the top third of funds. You have to explain to them that they have to compare funds versus their peers, otherwise they are comparing apples and oranges.

http://performance.morningstar.com/fund ... on?t=FFIDX
http://performance.morningstar.com/fund ... on?t=VIGRX

[Luckywon]

Is it likely or possible that he will have to pay 1000 a year as an Asset Under Management Fee with Edward Jones for just this Fidelity Fund?

That's a very best case scenario. Likely, things will be far worse.

[mptfan]

Did your friend ask for your advice?

[Stinky]

He says that he talked to his Edward Jones rep

So your friend is already with EJ?

He’s already paying EJ a boatload of fees. Your friend can see it himself if he looks.

Why would your friend want to pay even more of his hard earned money to EJ?

[Brianmcg321]

He will more than likely be paying a lot more than $1,000 per year.

[runyanorama]

I was approached a few years back with an opportunity to apply to become an Edward Jones broker. I quickly discovered that this would be a SALES job rather than a finance or investment analyst job, and I soon lost interest. They are only allowed to promote specific, actively-managed funds from specific fund families (JP Morgan, MFS, et al.) who essentially pay EJ a “kickback” in return for bringing assets their way. They also charge something like a 1.35% AUM annual fee off the top of your return, even *before* taking into account the expense ratios of whatever funds they put you in.

My now-retired father uses Edward Jones because he came of age before the internet and isn’t in the habit of researching or educating himself on finance and investing, so he feels like he has no choice but to turn his life savings over to non-fiduciary salespeople. I, on the other hand, have resolved to stay the heck away from them and I would advise your loved ones to do the same!

Your friend will be better off financially following a simple index-based strategy and using a discount brokerage such as Fidelity or Vanguard. Hope this helps!

[John Z]

It's been a while since I've seen this link posted and forgot that I had it. Read it and pass it on to your friend.

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

[Portfolio7]

One other thing about EJ. I honestly believe the sales people may not fully understand how they are paid.

I have a softball acquaintance who is doing very well at EJ. I was exploring opportunities a few years back and asked what he thought of working there. I dug into the structure of the job, the advice, and compensation. One of the things he denied strongly was that there was an AUM charge. He could have been lying, though I was watching closely and he seemed authentic. Authentic but wrong. I think he didn't fully understand the way the money flowed. Either that or he got past my BS detector. The thing is, I've read comments from other EJ advisors on-line that suggest they don't understand it either.

In any case, your friend's EJ advisor may convincingly deny the AUM fee exists, but it does.

I'm not going to opine on whether the EJ xfer is a mistake, but I'll say this - I have zero interest in an EJ advisor myself, and I suspect your friend is uncertain and lacking the kind of experience he needs to reach that same conclusion. It's difficult where friends are concerned, and I stay out of the discussion unless I'm invited in.

[Nutmeg]

In any case, your friend's EJ advisor may convincingly deny the AUM fee exists, but it does.

A relative told me that her financial advisor is advising her for free. She said that she told the advisor that 1 1/2 percent was too much, so it is free. I told her that I have never heard of a financial advisor charging an AUM fee of less than 1 percent, but I don’t know whether she believed me.

[GrowthSeeker]

It makes no sense whatsoever...Avoid EJ like Coronavirus.

EdJonavirus

[Kintora]

EJ's "Guided Solutions" is their answer for those who want to be more self-directed, so yes it's possible. But I don't see why then you'd do that, as the fees are still very high, just not quite as high as the traditional, full advisory "service."

My Guided Solutions accounts were 1.35% AUM fee before I escaped EJ. I am very happy at Vanguard now.

[One Ping]

I told her that I have never heard of a financial advisor charging an AUM fee of less than 1 percent, ...

I agree with everything that's been said about EJ being a bad apple.

Having said that, there are AUM Registered Investment Advisors (RIAs) who do charge less than 1% AUM. Here are links to a couple of investment company Form ADVs who charge less than 1%.

Vestory, see page 5 (0.9% up to $1M, less above that)
Robinswood, see page 7 (0.75%, $7,500/year maximum)

I'm confident there are more, especially when looking at the blended fee structure larger investment portfolios sometimes fall under. Not saying it's common, but it is not zero.

ETA: Full Disclosure: I have no relationship with either Vestory or Robinswood.

[Jazzysoon]

While 1% fee for AUM is sort of a general guideline, it's can vary significantly depending on what the total portfolio that is under management. If its less than 500k most firms charge more. EJ should be able to provide fees/portfolio size.

[One Ping]

While 1% fee for AUM is sort of a general guideline, it's can vary significantly depending on what the total portfolio that is under management. If its less than 500k most firms charge more.

Maybe, but if you want a RIA it pays to look around. Robinswood, for example, has a minimum account size of $250K @ 0.75% AUM. They use a blended fee structure. If you have $2M the blended fee is 0.375%.

Full Disclosure: I have no relationship with either Vestory or Robinswood.

[JBTX]

I am looking at a friends EJ rollover IRA statements. I can see the funds, and see that most of the have 5.25% loads up front and 1-2% annual fees. But I don't see a wrap fee. Where exactly would you find the wrap fee, if one exists?

[dbr]

Annual fee is the wrap fee, I would assume.

[Nutmeg]

Thanks, One Ping, for the information about financial advisors that don’t charge client management fees based on AUM!

I have the same question as JBTX:

Where exactly would you find the wrap fee, if one exists?

I now have fourth quarter statements and don’t see anything that says “annual fee” or “wrap fee” or anything similar.

Of course, this is one case in which I would be happy to learn that I was mistaken and that there is no AUM-based fee on my relative’s account!

[bloom2708]

Thanks, One Ping, for the information about financial advisors that don’t charge client management fees based on AUM!

I have the same question as JBTX:

Where exactly would you find the wrap fee, if one exists?

I now have fourth quarter statements and don’t see anything that says “annual fee” or “wrap fee” or anything similar.

Of course, this is one case in which I would be happy to learn that I was mistaken and that there is no AUM-based fee on my relative’s account!

You have to go offsite from the EJ statements and site to find the true fees.

12b-1 marketing fees and potential sales fees. Search for the fund tickers through Google/Bing and dive in. EJ hides the fees quite well.

[rockstar]

How does somebody go from having someone else mange their funds to diy without making mistakes? I can see why the person would want someone else to manage their funds. Do you really want to experience your first major drawdown while retired?

However, if the expected real return for bonds is zero and equities are 4ish, do you really want to pay AUM?

This is a tough situation, where I don’t think there easy answers. This is also why I prefer pensions over 401Ks.

[mptfan]

You have to go offsite from the EJ statements and site to find the true fees.

12b-1 marketing fees and potential sales fees. Search for the fund tickers through Google/Bing and dive in. EJ hides the fees quite well.

I agree that EJ hides their fees quite well, but we are basically random strangers on the internet telling people that EJ charges fees that cannot be found anywhere...if we can't provide a cite or a source that shows where or how they are charging a fee why would we expect people to believe us? Because someone said so on an anonymous internet forum?

[bloom2708]

You have to go offsite from the EJ statements and site to find the true fees.

12b-1 marketing fees and potential sales fees. Search for the fund tickers through Google/Bing and dive in. EJ hides the fees quite well.

I agree that EJ hides their fees quite well, but we are basically random strangers on the internet telling people that EJ charges fees that cannot be found anywhere...if we can't provide a cite or a source that shows where or how they are charging a fee why would we expect people to believe us? Because someone said so on an anonymous internet forum?

I was a customer for 3 (painful) years. First hand experience.

"cannot be found anywhere" is different from "cannot be found on their website/your EJ account/documentation provided".

The information is all out there for the funds EJ sells. I still remember my Oppenheimer fund with a 2.1% expense ratio, 12b-1 fee and back end sales fee to get out early. It was a beaut of a fund.

[oldcomputerguy]

I am a close friend of someone who has a Fidelity Fund that has done well for him He says that he talked to his Edward Jones rep and is planning to put this 100K with Edward Jones, keeping the Fidelity Fund but in his Edward Jones account.'

After reading through the thread, I don't think I've seen anyone ask (unless I just missed it), so I'll ask... exactly what does your friend hope to gain by making this move?

If your friendl plans to keep the existing Fidelity fund, then the act of simply moving that fund from Fidelity to Edward Jones doesn't seem to have any upside, at least not a financial one that I can see. And if (as you say) the fund has done well for him, does he expect it will do better somehow if it is being held at Edward Jones rather than at Fidelity?

[Vanguard Fan 1367]

I am a close friend of someone who has a Fidelity Fund that has done well for him He says that he talked to his Edward Jones rep and is planning to put this 100K with Edward Jones, keeping the Fidelity Fund but in his Edward Jones account.'

After reading through the thread, I don't think I've seen anyone ask (unless I just missed it), so I'll ask... exactly what does your friend hope to gain by making this move?

If your friendl plans to keep the existing Fidelity fund, then the act of simply moving that fund from Fidelity to Edward Jones doesn't seem to have any upside, at least not a financial one that I can see. And if (as you say) the fund has done well for him, does he expect it will do better somehow if it is being held at Edward Jones rather than at Fidelity?

My friend went to his EJ advisor to discuss retirement options, he is thinking about retiring. I think that the advisor talked him into considering the move because my friend doesn't have a lot of desire to learn much about investing and wants help from the rep. If the advisor would get another 1000 a year from the friend moving the fund I can see where the EJ rep might talk about things like wouldn't it be simpler to have it all together.

After I did communicate with my friend he says that he will ask the advisor if there are any fees involved with moving the Fidelity fund to EJ and if there are he will leave the Fidelity fund where it is.

[JBTX]

Read some of verbiage on fees:

https://www.edwardjones.com/images/LGL-8944-A_Final.pdf

I'm looking at a statement with revenue sharing (payments to Edward Jones from other fund companies) disclosures, after saying revenue sharing is part of "virtually all" of its transactions.

We want you to understand that Edward Jones' receipt of revenue sharing payments creates a potential conflict of interest in the form of an additional financial incentive and financial benefit to the firm, it's financial advisors and equity owners in connection with the sale of products from those product partners.

It then goes on to say about 20% of the companies profit is due to revenue sharing.

[John Z]

Excellent link, thank you. I've seen it before but now I will bookmark it for future EJ discussions.

[abuss368]

I am a close friend of someone who has a Fidelity Fund that has done well for him He says that he talked to his Edward Jones rep and is planning to put this 100K with Edward Jones, keeping the Fidelity Fund but in his Edward Jones account.'

Is it likely or possible that he will have to pay 1000 a year as an Asset Under Management Fee with Edward Jones for just this Fidelity Fund?

I don't think that he can afford to pay the 1000 if he retires, which he is thinking about doing.

He could simply move his portfolio directly to Fidelity (or Vanguard) and have the same fund with no expenses. Imagine that $1,000 working for him and compound each and every year into the future.

[Stinky]

Read some of verbiage on fees:

https://www.edwardjones.com/images/LGL-8944-A_Final.pdf

I'm looking at a statement with revenue sharing (payments to Edward Jones from other fund companies) disclosures, after saying revenue sharing is part of "virtually all" of its transactions.

We want you to understand that Edward Jones' receipt of revenue sharing payments creates a potential conflict of interest in the form of an additional financial incentive and financial benefit to the firm, it's financial advisors and equity owners in connection with the sale of products from those product partners.

It then goes on to say about 20% of the companies profit is due to revenue sharing.

Wow! A 48 page disclosure from EJ about how they make money from their clients.

Wouldn’t it be nice if they would calculate a single number for each client each year - “How much revenue we received from our relationship with you”. But I’m sure that’s too much to ask of EJ .....,

[mptfan]

Wouldn’t it be nice if they would calculate a single number for each client each year - “How much revenue we received from our relationship with you”. But I’m sure that’s too much to ask of EJ .....,

It's not in their best interests to clearly disclose how much they make from their clients, I think most of their clients would be shocked if they knew how much they were paying.