Edward Jones Sued for Shuttling Customers to Fee Accounts
Four Edward D. Jones & Co. customers have filed a class-action lawsuit against the company and its executives, asserting that its aggressive promotion of fee-based advisory accounts is an illegal “reverse churning scheme” benefiting the firm at the expense of investors.
The complaint, filed in federal court in the Eastern District of California on March 30, said the firm has pressured its more than 16,000 brokers to switch their largely middle-income brokerage customers from commission accounts into advisory accounts that charge as much as 2% of assets annually, even though the clients “generally engaged in very little trading.”
Jones, which booked more than 75% of its revenue in 2017 from mutual fund sales to mom-and-pop customers, began marketing fee-based accounts in 2008 but accelerated its push “aggressively” in 2016, according to the complaint.
The St. Louis-based firm orchestrated the strategy “under the guise” of complying with the Department of Labor’s fiduciary rule governing retirement accounts that became partially effective last year, and much of the money was channeled to proprietary mutual funds that Jones introduced in 2013, it said.
“In orchestrating this scheme to churn revenue from essentially dead assets, Edward Jones made misleading statements and material omissions to their clients, including Plaintiffs, about the amount of fees they would pay,” the filing said.
The lawsuit, which also names Jones managing partner James D. Weddle, nine other senior executives and two proprietary asset management units as defendants, does not estimate the number of potential customers who could be represented in the class. The purported class covers people whose accounts switched from transactional brokerage to fee-based advisory accounts between March 30, 2013, and March 30, 2018.
“Edward Jones has consistently offered both fee-based and commission-based client accounts that adhere to all regulatory requirements,” spokesman John Boul wrote in an emailed statement. “We believe Edward Jones client accounts are among the best options in the industry, and we intend to vigorously defend this action.”
Average annual balances in Jones’ advisory programs, Advisory Solutions and Guided Solutions, more than doubled to $265 billion in 2017 from $101 billion in 2013, according to the complaint. Fees generally range between 1.35% and 1.50% of assets annually, and can reach 2% when administrative fees and underlying fund expenses are included, it said.
A wide range of firms, from Jones to Ameriprise Financial to wirehouses such as Merrill Lynch, Morgan Stanley and UBS, have been promoting advisory accounts in recent years because they generate stable fees regardless of retail customers’ trading activities. Fee accounts also protect firms and brokers from allegations of churning, or trading merely to generate commissions.
The rapid growth of the advisory accounts, however, has raised regulatory concerns about firms’ diligence in determining the most appropriate account for particular customers. Those who do little trading, for example, might pay less in a commission account than they would in an advisory account with an asset-based fee.
The Financial Industry Regulatory Authority highlighted that issue, known as “reverse churning,” as an examination priority this year.
The lawsuit asserts that Jones’ marketing materials imply that advisory and commission accounts are comparable and do not fully disclose the conflict of interest inherent in Jones’ liberal use of its in-house “Bridge Builder” funds in advisory accounts. The fund family is managed by Olive Street Investment Advisors, a unit of parent company Jones Financial.
Jones generated nearly $17.2 billion in fees from advisory accounts between 2013 and 2017, according to the lawsuit.
“In order to continue to grow its bottom line, which had flattened before it had begun moving to a fee-based model, Edward Jones clearly intended to – and did – compel clients into a fee-based advisory program, regardless of whether such a move was suitable,” it said.
John Garner of the Garner Law Office in Willows Calif., a co-counsel in the class-action along with Ivy Ngo of Franklin D. Azar & Associates in Aurora, Col., said the plaintiffs who reached out to his office are high-profile leaders in their communities, and include a county supervisor, a retired law enforcement official and a community organizer.
Did Edward Jones reps hold a gun to investors’ heads and force them to sign documents authorizing a switch to fee-based accounts? I doubt it. I also doubt that E.J. has dumped commission-based trading as a option. Sounds like some opportunistic attorneys have teamed up with some equally opportunistic clients.
Just wait until the plaintiff attorneys delve deep and discover how many properly laddered corporate and muni bond portfolio’s with NO holding fee, were very strongly encouraged to convert to a fee based platform. Hence converting a no fee income portfolio to a monthly “management” fee. The totals will most likely be staggering. Not in the clients’ best interest, I would think.
Field Supervision would scrutinize the type of activity you describe.
Field Supervision at Edward Jones “looks the other way” when ever it is in the interest of the partners a.k.a their profits. I experienced this first hand when EJs was marking up bonds in new offerings (for which they were fined $13 million in August of 2015). I brought up the fact that my client should not be charged a spread for a new issue of a NJ municipal bond and was told that “I did not know how to price the sale of a bond”. My “field supervisor” reviewed the trade and never got back to me. I later learned that at the time EJs had been ordered to stop the practice of marking up new issues (to their unsuspecting retail clients) while under investigation by the SEC. EJs is a wolf in sheeps clothing
You may want to consider that your experience level with Edward Jones is causing a view with “rose colored glasses”. Otherwise continue on, and be certain to put a tooth under your pillow.
You must never have worked there before. I was fast tracking there before I quit and formed my own independent practice as a fiduciary advisor. All compliance really cared about was that you obtained client signatures for what you were doing (insert slick sales person here). Many advisors there would sell loaded mutual funds and then set a date for two years down the road to move them to a fee based account. Two years was the magic number to avoid paying back any of the up front commission they collected and avoid attention from compliance. This tactic was even suggested to me by a senior field trainer.
I am OUTRAGED BECAUSE THIS IS EXACTLY WHAT HAPPENED TO ME!!!!!!!!!!!!!!! i JUST FOUND THIS OUT LAST WEEK AND AFTER GOING BACK THROUGH ALL MY STATEMENTS I HAVE IN A BINDER, i FIND THAT IT WAS 2 YEARS AND THEN THEY HAD A NEW GUY START HANDLING MY ACCOUNT AND THEN UNBEKNOWNST TO ME , THEY CHANGED MY CUSTOMER TYPE , I’M FINDING OUT, AND STARTED MANAGING MY ACCOUNT AND BURYING A MONTHLY FEE IN THE ACTIVITY SECTION THAT I NEVER NOTICED. tHEY SAY i SIGNED UP FOR THIS AND i’M SAYING I DID NOT! THEY SAY THEY HAVE MY SIGNATURE. I WANT TO SEE THE ACTUAL DOCUMENT I SUPPOSEDLY SIGNED! WHAT DO I DO?? tHEY COLLECTED OVER 5000. IN FEES FROM MY ACCOUNT AND I WANT IT BACK. AND I WANT THEM TO BE PUNISHED FOR DOING THAT!!
I am a retiree woman who just found out that this is what happened to my account at EJ since 2011!! I was told that the previous FA is responsible for this changing of my account without my permission! I don’t believe them! I think they have full knowledge that they did not act in MY best interests and now it’s been over a week since I was told they would have corporate reach out to me and I’ve heard nothing! I am fit to be tied. Over 5000 in fees that I never ok’d. I trusted them!! What do I do now? Join a class action lawsuit?
It sounds like an opportunistic group of Investment Advisors who have a fiduciary obligation to those clients. JP Morgan is/was doing the same thing. Hold the security for a year in a Class C or flip a Class A share after 2-years into managed accounts. This increase revenue to the firm and rep up to or exceeding 1067%. So, don’t give me the bs of “hold[ing] a gun to [their] head” it’s all about making money for Advisor and the firm, get it straight.
Yes, basically. Clients were told they had three choices for IRA money – “Level Fee”, Best Interest Contract (transaction based acct that did not allow mutual funds), or “Grandfathered Account” (which prohibited adding new money, new purchases & rebalancing of MFds). Did they force them – no. Did they make it impossible to do what most folks want without rolling to fee-based – yes. And it was from the top down. I had several friends, good people, who took their entire client list and told each one that “the government/DOL/Obama was forcing this… not much we can do about it”. It’s the reason I looked around, and left.
This is why I left Edward Jones for Raymond James in 2016. The DOL was the final straw Edward Jones core philosophy was to find opportunity in adversity and they certainly utilized the DOL opportunity to put profits ahead of clients. I saw good people over the years toss their ethics aside to follow the flock. It was hard to leave, but glad I did. Too bad the firm went to the dark side, I believe they were a great firm at one point. They now have 5 advisors in my town 4 years ago I was the only one. I would bet only one office is profitable. Ted Jones wouldn’t be proud.
I was able to maintain my clients in commission based. It sounds like you jumped ship right after dol when the structure was still being worked on and in transition. Yes it was more work on our end as the FA (re: paperwork) to offer transactional accounts due to one with mutual funds and one with stocks but it was doable and maintained options. What firm are you with now and how did they handle the transition?
Did Edward Jones hold a gun to the head of their brokers masquerading as I-work-in-my-clients’-best-interest financial adviso(e)rs’ to get them to switch their clients to fee-based accounts or was it just some perverse incentives that were dangled in front of their noses that made them do it? Follow the money!
was told that the law changes “required” me to change our employee pension plans to a fee-based model. I was very unhappy, but I didn’t know that I had any options. I am not a sophisticated investor, and I am responsible for my employees’ retirement account. I did switch Edward Jones offices, but I’m still stuck.
Your completely incorrect. As a former Jones Advisor we were given no other option but to make clients convert to fee based in all retirement accounts. No trades were allowed to be placed in accounts that were not fee based. May want to do a little research before you make assumptions.
What is a select transactional retirement account? Were you reading the same uptick info I was? I converted very few…unless clients chose it and gave them all costs to compare. They did have the choice and were not forced into fee based.
Ron, I was lied to. I have no agreement stating that I have requested going from an retirement account with no trading activity to an Advisory Solutions account charging me a percentage of my total per month. I know now that the advisor knew full well that he was lying to me about a small little fee that is going to starting next month as an extra layer of security. That was in 2011. I objected and said all my fees were paid up front. He told me this had nothing to do with that and that it was mandatory. Me, trusting my advisor believed him and now I find out he blatantly lied to me. When I discovered what happened as my old advisor was fired a couple months ago and during a meeting with the new advisor, I was livid and told the Advisor that I expect every penny to be repaid to me and my account corrected at NO COST TO ME. The new advisor just looked surprised and all he could say was “there’s a reason why your advisor is no longer with Edward Jones and I’m so sorry” . I told him well, we shall see if Edward Jones is sorry because I’m demanding that my account be corrected back to the original model I signed up for and at NO COST TO ME for any transactions needed. So far, the monthly fee’s total over 4,000. I wrote a letter and just heard back from a lawyer that they will return all fee’s once I have exited that Advisory Solutions program and am set up in the same model I started out with. I will do that but I’ve informed him that I will not pay 1 penny to have my account corrected back to the original model. I’m a retired woman who worked for a major corporation for 20 years and got laid off when they sent my job overseas 2009! It took me over a year to find another job and then it was only a contract job . In 2012 i had my appendix rupture 4 hours after my insurance went to cobra!! I almost died. I had to sell my home which took a beating and lost a lot of the equity I had built up like so many others through no fault of my own! I’ve tried to do all the right things and I have struggled because of all the change like so many , but to call someone like me an opportunist is disgusting! I have not decided to sue Edward Jones at this point. But, I will tell you that if they don’t fix this by doing the right thing, I will do what I have to do. I refuse to be intimidated or played because of greed. You people in sales need to have integrity and the cut throat games are why you get sued. I’m just a grama at this point in my life trying to take care of myself and god dammit, I refuse to let a financial institution mess with my security.
No, guns are illegal in Edward Jones office. But they did use verbal gun per Edward Jones instructions. Client that paid A shares 5+ year previous were told that if they did not convert to Fee Based that their account would be locked and no changes can be made. Only money can be withdrawn. Of course! many of those client still contributed to their IRA, and were told that couldn’t happen any longer due to the Dept of Labor fiduciary ruling. Note: the fiduciary ruling was denied. But, did Edward Jones return clients accounts back to original ???? noooooo, they kept it the same because now they are getting monthly fees from the clients. Churning, unethical and ironically a breach of fiduciary responsibility. Don’t believe me? It’s all in correspondence.
They came in and said, “ you don’t have a choice, your simple IRA is with us and this is what we require! It’s the law!” I pushed back hard and they found a different way for me but most of my fellow employees were not sophisticated enough to try, this is their first venture into broker assisted investment. So gun, no, playing off ignorance, you better believe it.
I was told by my broker that it was a requirement because of the dept of labor fiduciary rule. I unfortunately took his advice without researching the information. I went to do a trade for Apple stock and was charged 300.00, which i could have done on Schwab for 4.95. I have since closed my account with Edward Jones.
No, they didn’t hold a gun to my head but my adviser did say that if I did not switch to a fee based account and I chose to stay with a commission based account that I could no longer make any changes to my account at all. He basically said, if you stick with the commission based you can no longer increase your contributions, change the mutual funds you are holding or anything else. It was as forced of a change as they could make it.
Smoke Fire. You can be certain all warehouses are doing this either outright or via their comp plan.
wirehouses (not “warehouses”)
As they say, the chickens have come to roost at ‘folksy’ Edward Jones. Precisely as this article (and this lawsuit) states, these hypocrites have been pushing fee-based over commission since 2009, along with their proprietary Bridge Builder mutual funds, all without adequate disclosure and at all costs, to benefit their filthy rich General Partners!! Reason being is, their Managing Partner’s “2020 Vision” (a combined FA headcount and assets-under-management ‘growth’ initiative which has been unsuccessfully pursued over the last few years) had to be funded by some sales scheme!
So no, while I’m sure noone “held a gun to the investors heads to switch from commission to fee-based”, I can assure you that FAs were also not disclosing the self-serving reasons that management wanted clients to switch either! (Just today, I picked up another client from EJones who said he was tired of paying a fee for what he described as a “packaged investment program”, which he said his FA does not understand nor manage. Hmmm–sounds like this client would have been better served with a commission-based solution. Oh but wait, that doesn’t fit EJones’ profit-focused preference, disguised as DOL appropriate!) Nor does EJones’ management make sure that their FAs disclose to their clients that they and their spouses are handsomely compensated twice-annually with weeklong “Diversification Trips” to 4- and 5-Star resorts around the globe, for achieving ever higher levels of production success, through their fee-based and proprietary investments programs either!
So good for these suitors… let’s see how many more hoodwinked clients they can include to join their solid, class-action lawsuit, against the biggest house-of-cards firm in the industry!!
YEP! Anyone who can’t see this is deceived by the green koolaid producing cult. #churchofscientoligy
A very nice rebuttal sir, I have a small firm in Joplin, MO where I have been in business for 28 years now. I have watched Jones absolutely run over our community. My last count was 11 branches inside the city limits of a population of approximately 60,000 citizens. There is one thing they are good at, (And it’s not their job), it’s marketing. In my opinion they have completely wrecked the lives of thousands of people. Creating tax problems, generating outrageous fees while offering lack-luster account performance at best. Another tactic I saw displayed recently was a person who went to work for them and was immediately told they had to transfer all of their accounts with other firms to Jones. I guarantee you after Jones is done with them, they will fight to keep their account. What an unethical practice. (Just another way of gathering assets). One last comment. Today I had lunch with a wholesaler from a REIT who formerly worked for Jones. His first comment when the subject came up was, “They are a cult”. After a short discussion, we agreed that in our opinion it was very similar to L Ron Hubbard and the church of Scientology. It is my opinion that Jones is nothing short of a scam of an organization.
I just wanted to clarify one of your points: someone went to work for Jones and had to move all of their accounts to Jones. If they are registered (or studying to get registered) that is required practice.
There are more Edward Jones offices than McDonald’s. Discuss amongst yourselves.
Edward D Jones are crooks. Have scammed my elderly parents for years. My father is dying of cancer and yesterday they called and called harrassing a man who cannot even talk on the phone. He can only go a few feet before he is out of air, yet he drove to their office because of their insistance for my father signing more paperwork. They have him so rattled. My sister , who was visiting had just asked my dad if he needed anything from the store as he was incapable . A few minutes ut after she left the house Edward D Jones office began calling and had him so convinced he needed to get this done, only the adrenaline could have made him able to get to his car,and drive to their office. I have been at their home even in years past when they called and called and my parents would not answer the phone they eventually come to their home and continue to harass them until they get him to do whatever they wish. I have contacted the attorney general in the past and I’m contacting them again. I am now going to be in an all-out War campaign against Edward D Jones for harassing and taking advantage of my elderly parents and show them for what they really are nothing but Crooks praying upon the elderly.
Hi Vickie, this blog of yours breaks my heart for your Dad and for you. I would call this Elder abuse!! In one of my comments in this blog — I did mention that I felt even for my husband and my self we were taken advantage of–that I was not getting the my questions answered–and when I did it was so vague that I still felt I was not getting the answers I needed. I would not sign any thing until I read it, understood it–the advisory/guided solutions thing I did not want any part of period. After being with Jones 30 years I wanted my choice for being so loyal. There is so much more to all this in a negative way…Then this past Saturday received a letter in the mail–I am paraphrasing here–what I took from the letter is this: If I don’t come in and sign the papers my portfolio will be liquidated!!!! Monday I had my EJ account moved to Raymond James–just to get away from that FA/ his BOA and EJ. I am hoping this change will be better–I have shared my feelings about this with the Raymond James FA and his BOA–in fact both of them -great people–had been with my Jones office before and they went to Raymond James together–leaving EJ behind. Having had a past with them I am hopeful that this will be a better move. As far as your Dad and you go–when anyone preys on an elder that is just wrong–Elder abuse is an awful thing–they see your dad has some money—lets hope they at your dad’s EJ office have not done anything illegal, unethical or immoral with your dad’s retirement money and funds. God bless you and your dad—Our government /judicial system needs to get a handle on all these financial institutions–and hold them to a standard of true goodness–not greed. When any person is taken advantage Financially–they should be imprisoned–for life.–Then all this would stop!!! Best to you and your Dad
I’m curious…what was the paperwork? Did it have to do with estate work due to his poor health? Generally, FA’s will visit an elderly client for client service. Will you elaborate more on how this was elder abuse? That’s a very strong complaint and curious what paperwork was signed? Also what did the attorney general have to say?
I am a retired woman who after being laid off in 2009 became a client with EJones. I did not want fees and was basically offered pre paid fees , was my understanding and then I would not be charged fees everytime I took a distribution. I started with around 100,000. For 2 years I did not have any fees except the 40.00 a year fee. Then I had a new guy all of a sudden in 2011. He informed me that there would be a nominal fee starting that I probably won’t even notice , he claimed , because its so small. He said it was another layer of security. I said , I already paid my fees up front and was promised no more fees as long as your trading inside the funds?? I said I was not trading at all. I take distributions and my fees were paid up front when I invested. Now, people, this is what I was told in 2009. In 2011 the new guy basically said it wasn’t a choice to opt out of the monthly small fee and that it was business as usual and , oh , you won’t even notice it. Well, I like the guy at the time and I did feel a trust with him that he worked at to get from me and so that was that. Now, I find out last week Aug 15 2018 that I have a new guy who wants to go over acct info to verify everything since my old guy is now gone. After a few minutes of talking , I come to the realization that I’ve been paying a monthly fee based on the value of my acct since 2011!! And until mid 2013, those fees were only visible in the body of the statement buried! I was very upset and told the guy that I was told it wasn’t a choice! Now I ask what happened to the several thousand I paid up front? and why would I agree to a month fee based account when those accounts are for people who do a lot of trading?????? I feel betrayed by Edward Jones and the Advisors who put their company and profits ahead of my best interests. The guy said Edward Jones is very sorry this happened but there is a reason the previous guy is no longer with Edward Jones. Ya, well if Edward Jones is really sorry they will fix this asap!! He said he will alert the powers that be and corporate will reach out to me. That was last week and I finally called the office this past Monday and went over what I said last week and the office gal basically said the new guy had a family emergency and she wasn’t sure if he had done anything on my issue yet. Well, I told her to elevate it asap because I wasn’t going to wait . I then put everything in an email and sent that to her and again instructed her to elevate this issue to their corporate asap. That was day before yesterday and I only had an email from the secretary who thanked me for writing and stating my case and she will forward it on to corporate. She then emailed a few hours laters stating that they had received my forwarded email and will investigate. She also told me on the phone that they have my signature. What?? I feel like I was purposely duped with untruths if I did sign something I sure as hell don’t remember signing anything knowing that I was actually changing my customer type to Advisory solutions!! Never. I want to see the ACTUAL DOCUMENT WITH MY SIGNATURE THAT I SUPPOSEDLY SIGNED.
Anyway, I am scared to death and went online as well as my son did and found several pending class action lawsuits have been filed!! I am angry and need advice. I am going to call the Lawyers handling a couple of the lawsuits to find out what is going on because it is looking more and more like the company had been systematically playing games and taking advantage of retirees!!!!!!!!!!!!!! Can someone please advise?? Thank you, JC
So just to clarify on the article and your comments here…did this person who left jones see advisors push to switch to fee based? Was this FA who quit required or pushed to switch people to fee based accounts? Was he asked to do this through his training, mentor or asset sharing partners? Why did he quit and did he join you at your firm? Other than requiring the FA switching accounts to jones, (which generally is a common practice with the firm you are at) what exactly is your argument with Jones? Wrecked thousands of lives? That generalization creates a loss of credibility on your end. Also, out of curiousity since you sited fees. What is the charge for fee based accounts in your independent firm?
Wow….someone is a little bitter over being fired at Edward Jones. Less anger….more smiles friend
The Eddie Jones story is that they do everything for the benefit of client first, advisor second–not exactly. They sold against fee based in favor of A shares until they figured out the advisory was a way to increase revenue and help in those down markets where new money is hard to gather. How has performance been? Higher fees for lower volatility and higher performance. According to their own numbers last I knew, the clients get neither lower volatility nor higher returns, but do get higher fees. Regarding being an EJ advisor: Until advisors have an issue of any kind (small or large), they won’t find out whether or not EJ has their back. Most things they say they do to support and protect advisors, they use to crush them if one parts ways. Look at the contracts–you will be sued if you tell anyone to file a complaint against Jones, but they can and do it all the time since it’s not in the contract that they can’t do it. The annual audit is done by everyone for the same purposes (to nail you if anything comes up), but they always presented it as making sure if FINRA shows up that you’re protected. They encourage BOAs to establish relationships with clients so they have a shot at keeping the BOA and clients, but present it as saving advisors time and building sticky relationships with your team. Most advisors at EJ are super good folks in my experience, it’s too bad the koolaid is so strong that it’s hard to get the message through to them. It’s quite the closed circle. As the saying goes, ignorance is bliss.
He wasn’t fired, he quit
Fired from Edward Scientolo-Jones? Sounds like the individual has character! LOL It never ceases to amaze me the amount of advisors who will give so much of themselves to a corporation that only cares about them if they are producing.
I have had many Edward Jones clients walk into my office, I have yet to have one walk out. Easy pickings when you are competing against mediocre financial planning & advice, high fees, and advisors who don’t have to look out for the clients best interest.
Oh well, at least you guys “Make Sense of Investing.”
you’ve “never had one walk out”?? What are you doing with them there, Jeffrey Dahmer?
You are independent, I’m sure, because you could never cut it at a big firm. Try working a little harder instead of putting yourself on a golden pedestal
As an FA with Jones for over two decades, I have been very proud of the firm’s ethics up until the last few years. We really did have a culture of always trying to do the right thing for our clients. No brokerage firm is working for free, but while other firms were and still are compensating their advisers 8% for annuity sales, Jones went back to the insurance companies that we work with nearly 20 yrs ago and negotiated separate share classes making sure that advisers weren’t paid any more for an annuity sale vs mutual fund sale. I was always very proud to be able to look my clients in the eye and tell them that while I was recommending something that was going to cost them slightly more to own it wasn’t because I was going to make more.
I am in the tiny minority of advisors who did not covert clients to expensive fee based advisory accounts. I’ve been vocally opposed to these accounts from day one. And I am glad to see that we are being called out on it. I have taken a lot of grief for my stand.
Regarding the trips: On the face of it I can see why that might look pretty lavish but there are some things to consider. First, FAs are not given those trips. Advisors have an opportunity to earn up to two trips a year. But understand that we have no paid benefits, no paid vacation time, no paid sick time. Not only that, we pay a lot of the branch’s expenses personally. And if we want to hire more support staff or have our BOA ork overtime, we pay 100% of that. So if we do well and our offices are profitable, we have the opportunity to qualify for trips. The thinking originally behind this was that the founding partner felt it was important for advisors to take time off with their families. So this has just been part of the culture from day one. In my early years when I couldn’t afford to take my family on vacation, this was really important for us and helped maintain my sanity. The qualifications for trips are not based on any set product sold but an overall profitability.
I personally am glad we got sued. I’m sorry this is happening to a firm that really was sqeaky clean but it needs to be addressed. We’ll probably hide behind DOL as an excuse. But what excuse is there for converting an 80 year old witht an American funds A-share account that has had virtually no trading activity for the last five years into a fee-based account (which ironically will probably have some American funds in it.) Will be interesting to see how they explain those conversions were in the client’s “best interest.”
I am with you. Only one fee based acct in my book of 178 million. Please, EJ and the industry, just put your clients first.
You are spot on with your points. EJ forever sold almost only American Funds Class A shares (remember that fine they had to pay for not properly disclosing the revenue sharing with American Funds). Fee advisory was the devil to EJ, now it’s the gold standard – SMH.
I’m an independent, proudly use Commonwealth Financial Network since 2005, started in this field in 1994. I have those old Class A share clients too, it would not be ethical for me to suddenly transfer them to a fee-based account just because of the DOL (or any other reason). But for that rare occasion that it made life easier for the relationship (they are making those annual IRA contributions for example, keep their financial life consolidated, etc), I could transfer the account to fee-based but dramatically reduce my fee (not 1%+ but maybe just .50%). Yes, more than their Class A share 12b-1 fee but not 4x or more their annual cost, and they’d save the small up-front sales charge on the new money. I’d have more compliance responsibility and morally and ethically should diversify the managers much more too (some additional work) – but going from basically a .25% annual cost to 1%+ is horribly wrong – in my humble opinion.
I can honestly say I saw this coming (lawsuit) because the industry (and regulators) know what EJ has promoted in the past (Class A shares) and they have made the 180 turn (to advisory fees) – which is okay for new assets, but the reverse churning is wrong, simply wrong and highly unethical.
I realize this is just one experienced advisor’s opinion, but I don’t seem to be alone.
Lastly, I know for a fact how EJ requires their in-branch staff (licensed or not) to transfer their personal accounts to EJ. They are told it’s a FINRA regulation – but it’s not, it’s EJ policy, and there’s a huge difference between regulation and policy. My assistant maintains her family’s accounts where they were when she started working for me. She obviously needs to disclose these accounts with compliance, and I gladly pay the $200 annual fee for her to be able to do this, because it’s the right thing to do.
As a spouse of a 30+ year Jones vet., I can not agree with you more. It was hard for him, as most around jumped on that band wagon, he never did. I’m so grateful and proud of his continued belief in doing was was truly right for his clients. Jones has earned this hit they are about to take.
It is disheartening to hear how widespread this practice has become. The veteran FAs in our region have kept existing clients in the accounts they established pre DOL because it was and still is best for the client.
We even plow through the cumbersome process to establish transactional accounts for clients who choose this option for future transactions.
We have, however, been using fee based accounts for new clients.
There are trade offs with each method. Good advisors can explain those to each client and allow them to decide which they prefer.
Proud of you and your spouse!
what did your husband do to stop the deception of others clients? I’m a victim and I’m just finding out how much Edward Jones cares about its clients. If he didn’t do anything to stop others from being deceived , he’s complicit as are you since you knew all along and have done nothing! Did you ever think about reporting them anonymously??? I am a senior just finding out a week ago and finding the company is blowing me off and now the games are starting. This is NOT OK! How about you FA’s out there who have parents, grand parents?? I have little money left and I am going to get to the bottom of this if its the last thing I do!
Good commentary. I was with EDJ for 19 years and left 2 years ago for another firm. I absolutely agree that EDJ used to be different and put the client first. Unfortunately, the greed based mentality of Weddle took over the client first and fairness mentality of John Bachman. You say squeaky clean, but EDJ got popped for similar behavior under the brief tenure of Doug Hill. At that time they were pushing FA’s to sell “preferred funds” from which they received revenue sharing (read kickbacks for those not in the industry) As you are likely aware that cost the General partners 335 Million.
When I saw that the management was forcing clients into advisory, which was chock full of EDJ proprietary funds, I was dumbfounded by their arrogance. Any fool could see they’d get sued and fined, but Mr. Weddle’s avarice prevailed. The GP’s deserve a massive smack down, I’m thinking it’ll end up over a billion when the dust settles.
Truly sad that such a decent firm, which has a lot of good folks working for them go down a bad road and abandon the principles they once adhered to.
14 yr SR BOA and I’m proud to say our branch has not jumped on that bandwagon either. We live in a rural hardworking community with a huge percentage of retirement accts. The enhanced review requirements are a good thing, we’ve connected like never before with clients we normally cannot get in the branch, but we’re making VERY few changes.
Good for you for resisting the move to advisory and guided accounts. That speaks well of you! In my opinion, the only reason to move clients from American Funds A-shares to Advisory accounts is to increase your gross revenue by 500%. How does that benefit the client, especially when their total costs just increased by about 1% PER YEAR? Also, how much does EJ benefit from having the money in proprietary Bridge Builder Funds? They cherry on top of all this, as you referenced, is the fact that some of the money that came out of the A-shares probably ended up in American Funds F-shares with the added advisory fee….again, a huge increase in client cost. How the hell do you justify that? I’d like to be a fly on the wall when that sales pitch is being made!!
Why would anyone convert an 80 year old’s IRA? Did you do it? It is not right and i am surprised your FASD let you do it. Most clients who converted to fee based were smaller size accounts under retirement age with possible annual contributions.
Thank you for finally saying it! Don’t tell me I WON a trip when I get a 1099 for it at the end of the year. I paid for it.
this has happened to me just last week! It was converted in 2011 unbeknownst to me!! And now I find all this crap out!! I’ve been to hell and back in the last nine years and I trusted Edward Jones. Now, I have to figure out what to do next in dealing with Edward Jones!!! Any suggestions?? I already sent an email after talking to the new FA and secretary. All I was told is this isn’t representative of Edward Jones and there is a reason why the previous FA is no longer with Edward Jones and were very sorry this happened to you. Ya, will if Edward Jones is really sorry they will fix this and make it right. I literally threw up after that appointment. I haven’t slept much since and I feel betrayed and scared that I cannot trust anyone right now. Tell me , is it worth trying to reason with the powers that be, or , do I need to get a lawyer??? JC
i AM ONE OF THE VICTIMS SIR! HOW DO I GET THIS FIXED?? DO I HAVE TO SUE AND EXPOSE THIS COMPANY FOR WHAT IT IS?? I AM LIVID!!!!!!
Sounds like someone who couldn’t hack it at Edward Jones, sour grapes included.
Independants (like you) are the scourge of the industry, selling indexed annuities with 20% commissions.
Scheisse Slayer – who me? Just another experience advisor. Couldn’t hack it a EJ? LMAO. Let’s compare tax returns. I’m an actual business owner too, not an employee. EJ couldn’t pay enough to work for them.
You obviously don’t know me (indexed annuities with 20% commissions) – I call BS. Not on our platform, and personally, I can count on one hand how many fixed annuities I’ve recommended (for a portion of their money) over the years.
Resist EJ and the truth will set you free. 🙂
Good for you to be working pro bono for your clients
And what do you charge clients to work with you? Jones average is .77%/AUC. We’re the lowest in the industry. Full service that is. And we’re worth every penny. It’s about value not cost. Go to Vanguard if you want low cost. And even Vanguard says an Advisors alpha is about 3%. On there website. We get a risk tolerance on every client(and spouse), find out their goals and find the best investments in a well balanced portfolio to get there. We let the client choose how to pay us. Advisory offers auto rebalancing and access to more than one fund family. We ask about wills, poa’s, umbrella liability policies, freezing their credit in light of recent events, we meet face to face twice a year with calls in between. And they call me anytime with any money question. Day or night, they all have my cell phone number. A top 100 company in training magazine, of Fortune 500 firms. 1 or 2 in client satisfaction for as long as I can remember. #5 Best Company to work for…..again, been on that list for 19 year. And we owned by the employees.
I’ll put us up against any firm or independent and compare overall cost of doing business vs the service we provide. Anytime.
You have some green liquid dripping from your lip. Theres a towel in the bathroom.
EJ is no different than most firms who dream about a world w/100% RIA business and FC’s they can squeeze with ever higher goals and no focus on customer service. I think this lawsuit is just the first of 1000’s that will be hitting the industry if we suffer another down market. Where EJ is really at risk is the proprietary funds and managers. I’ve also won over EJ clients recently, but it’s due to better service more than fees. Upper management in this industry has gotten fat off RIA fees, trails, and pushing FC’s to do more business, with less support, instead of looking after the clients. When was the last time you heard of a bonus or reward trip for great service? Due largely to that shortsightedness, the industry is moving more to independence every day. Nothing is perfect, but at least you don’t have clowns (who couldn’t do your job, and suck at theirs) pushing pet products, bank loans, or in house money managers on to you, and ultimately your clients. That’s one reason for firms dropping out of the protocol. They want to keep the income tap flowing, and know that clients will follow good service anytime. So let’s threaten the guys who generate the income we parasites live on. The days of promising clients you would look after their investments and then being forced to become an administrator, because a conference table surrounded by over paid middle managers dreamed up another way to justify their existence are GONE. Clients first, and everything else will fall into place. Add to that a system where class action lawyers pay all legal fees incurred for the bogus lawsuits they bring from “victim harvesting” and “issue generation” and you might get system that actually works.
Jones management is not forcing clients into fee based accounts. They allow clients to keep their existing IRA accounts as they are. They also provide for commission accounts for new IRA contributions as long as the FA has the client acknowledge conflicts of interests that are inherent in transactional accounts.
Brock – Why is jones Grandfathering Pre-DOL IRA accounts. Basically saying no more buying, but if you want to make future contributions or making investment changes, this fee-based account is a better choice. They are forcing client to move, based on grandfathering accounts. Why is Jones the only firm to do this?
Jones is almost forcing clients into fee based IRA accounts.
They still allow contributions to be made to commission accounts. The account has to be established separately from the grandfathered account with a disclosure of conflicts of interests that are inherent to transactional accounts.
Brock is correct. Clients still have the option of establishing a transactional based IRA. People are getting too many facts from former disgruntled EJ advisors.
The industry used the DOL to get more money in fee based. Jones knew their “grandfathered” action would do this. Advisors were positioning this to move to fee based and said it was industry wide. Btockif this was a deliberate and unfriendly client move.
Jones IS forcing investors into fee-based accounts. You can NOT add money into a “grandfathered” ira account. If your grandfathered account does not meet the new minimums imposed by Jones for a commission-based IRA, you ONLY have fee-based for the new money you’re contributing.
This is wrong and a real departure from what Jones was about for the 20+ years I’ve worked at this firm.
I’ve read that complaint through and I think these attorneys hit the nail on the head and they’ll be raking in big bucks for this greed and arrogance.
I read that the DOL and state of Mass. was investigating WFA for basically the same thing-namely, reverse churning. Based on all of the comments above, it seems like IF there is a problem, the courts and regulators will sniff it out. Over the next 12 months we’ll probably all have a much better feel for how the REGULATORS view this. What is a fact is that the FINRA focus in 2018 on their exams will be reverse churning. The regulators will eventually get to the bottom of all of this….c/b interesting to watch.
I left EJ because of how they handled the DOL ruling. It only required a few clicks and an e-signature to change the existing account to fee-based. They didn’t have a BIC option for the first year and when it arrived it was to cumbersome to use. You needed all new documents with separate accounts for stocks/bonds and mutual funds; and would be subject to a massive amount of extra documentation. The account minimums for non-fee-based IRAs were set at 100k. Leadership implied that we had to discuss with all the clients their options and needed to do what was in the clients best interest or we would be punished, but there was no workable BIC and the grandfathered accounts were restricted to purchases. If a client wanted to sell a stock in a grandfathered account and purchase another security it took a new account with a 2day turnaround and a 100k minimum.
I think the bic was available in 30-60 days and minimums went down eventually to 25k
I’m glad to see this getting the attention it so richly deserves, because there’s no doubt in my mind that MANY billions of dollars was moved from existing A-share accounts, accounts that were not traded at all, into advisory accounts….I believe this occurred in all firms, because I’ve seen it for myself. How much money left American Funds A-shares, with fund costs of around .65% including the .25% trail, and is now in EJ advisory accounts in which the broker revenue quintupled and client total costs tripled? How much ended up in the new ‘Bridge Builder’ funds? How much ended up in American Funds F-shares in the advisory accounts, with a huge increase in revenue to the rep?
I just red the comment by DB. If his information is accurate, he should consider informing the regulators and lawyers of what he has seen. It is stunning
Edward Jones has the highest satisfaction ratings in the industry from their clients. They do what is right for the client and the home office never instructs the FAs to sell any sort of investment over another. Never. They have always preached to do what is right for the client. Period.
But, you flunkies who couldn’t make it at Edward Jones keep telling your stories. Sorry to hear that you cant compete in your towns with Jones crushing you like the cockroaches that you are.
AC, you’re right when you make mention of EJ and ‘their’ clients, because they are EJ’s and not your clients–check your contract language. We on the indie side get our “surveys” directly from the clients that work with us because of our individual name, not the name of an empty stadium. You’re right also in that EJ doesn’t instruct you to sell any sort of investment. That’s because you’re limited to a handful of funds willing to pay EJ shelf space prices. And preaching is different from acting–see the $20 million fine for illegally marking up new bonds for those cherished clients. I used to have your EJ attitude too, thinking that indies didn’t have what it takes to make it in the big leagues. I joined the indie side and found things to be much different. The knowledge about investments, financial planning, estate planning, operations, charting, etc. in my office of 15 is incredible–well beyond any Jones branch and their Fin Planning dept in St Louis. Most of us on the post have been on the EJ side and now on the indie side. You obviously have only seen the Jones side of things. You have no idea of how naive your comments about us “flunkies” are. Besides, why do you care what we flunkies/cockroaches have to say? Maybe drinking some more koolaid and hearing from L Ron Weddle at the spring and summer regionals will cheer you up. Period.
Who is L Ron Weddle? You don’t even know the managing partners name? No wonder Jones let you go.
AC, he’s referring to L Ron Hubbard, leader of the “church” of scientology.
Exactly right, Jaffa. You can’t fix stupid.
Seriously? I work with someone who saw the light and left after almost 20 years when he realized his book wasn’t his. The reason EJ has the highest satisfaction rating is because they push for all advisors and BOA’s to fill out the survey. I worked for them too. I never did it or pay attention to those ratings knowing what they do. Go back and drink you Kool-Aid.
Why would I care if the clients are mine or Edward Jones? If I retire, I will be paid out in a retirement package, thus I couldn’t care less if they are mine or Jones. They put up all of the money, have given me training, and back office support……I guess the clients should be theirs.
It took your friend 20 years to realize the book wasn’t his? Sorry neither of you could make it.
You really are a preschooler, aren’t you AC? Guess you don’t have anything else to do. We can do more with our clients now than Jones ever allowed or offered. And love it when a preschooler tries to stomp his feet and put down a total stranger. All your comments tell much more about you than anyone else. Might want to go trolling elsewhere.
Listen here cockroach I just left after 9 years there. They were forcing clients to fee based which I did not succumb to the koolaid so ended up being an outsider in a so called great firm I had a client that lost her husband that had mutual funds for 12 plus years and they stated to me she had no choice but to liquidate the account which causes tax liabilty or move to fee based at 1.35 five times more I would not put my name on that and ironically neither would main office they wanted me to do it but they wouldn’t I left this and many other fees like 1099 t on limited partnerships charging clients years later is wrong I left because they are wrong so before you go calling anyone anything look in the mirror okay the green koolaid is bad try a different color you will be glad you did cockroach
Why could she not do a select ira? That does not make sense unless it was a very small account?
My dad used to say “he who calls people names just ran out of facts”……/hmmmmm. whowever AC is sounds like they just ran out of facts and have resorted to name calling. Very interesting…..hmmmmm
I was at Edward Jones for 13 years and left in 2015 to go independent. I still have friends there and an EJ advisor recently told me (before this story broke) that EJ had pulled off the, “biggest heist in US history” by moving transactional accounts to fee-based. His words not mine. Glad I left before all this happened.
Not Looking Back, you are 110% correct! I know former EJ reps and I know current EJ reps. I just learned this, and maybe it’s just for new reps at EJ, but he gets a $4 bonus for every $1,000 of new assets he brings in (that’s 4%). Bring in $1,000,000 in a month and he gets an additional $4,000 from EJ.
I’d love to know where and how that compensation is disclosed to the “client”. Curious also to know how many of those JD Power respondents know about this.
For the record, I’m not afraid of EJ, it fact, their work mostly provides some job security for me. In addition, I’ve never lost a client to EJ, but I certainly have picked up a few new clients from EJ (six figure clients too).
Good for you! I bet you put it in an indexed annuity and earned 20% up front.
I was trained at Jones and am now independent. I was trained to sell product that was pre-selected by the home office. Because I was a tenderfoot I did not know any better. At Jones the choices are limited and the choices benefit St. Louis the most. I don’t think that the employees at Jones can think of themselves as financial planners. Instead they are all just sales people. An independent who is a CFP can choose investments based upon their merit and applicability to accomplish client goals. Some people are happy just selling stuff and winning trips. I think they need to look in the mirror and ask themselves “is this the best I can be?”
AC, are you for real? Seriously, per prior post, those products are not on our platform, period, never were, never will be. In fact, clients moved to me for better service, lower fees, actually proactively managing the money (not a turn-key product manager), understanding income taxes (tax-loss harvesting, asset “location”, etc.), and holistic planning.
The introductions to EJ “clients” are like shooting fish in a barrel, easy, with my eyes closed (maybe you should open yours and see what your company is doing to you and their clients).
Just for clarification the New Asset Bonus that you are referring to only last for four years and then is reduced to $2/$1000 for year 5. After year 5 the bonus goes away. This is a firm incentive for new FAs to work harder since they are being paid a low salary and that salary decreases each year.
We all remember how hard It is to build a book, right? It is also not disclosed to the client because it is not directly paid from the client. I understand that in the nature of commission based business you would say “Well the client pays for everything” and I understand that. However, if you worked in client based business but on a salary basis you still aren’t disclosing things like that to a client. For example, would you disclose to a client how much you get matched in your 401k or how much you received in a Christmas bonus last year? That money is generated from revenue from business with a client but I understand where the scrutiny comes in with this type of business. Once again, made this post purely for clarification.
So let me understand. An FA that does well and clients trust him/her and they bring in assets should not recieve any compensation for that? What if the assets come over in kind? What if they come from another firm managed at 1.5%? When you meet with a client and they recieve a bonus for productivity or results… do you chastise them too? Do you have no reward or compensation in your practice for bringing in new assets? How are you compensated?
Sounds like you need a change of friends. Did not happen in my office
EJ is a good firm with good people–the DOL rule is a mess—Merrill handled it worse–lots of pressure on all the big houses and now EJ is the biggest—everything they do should be scrutinized but this is all done in a rear view mirror—my bet is they were trying to do the right thing with the info they had—-result is poor for everyone across the industry not just EJ
Brokerage firms put themselves 1st, reps 2nd and clients 3rd – always have and always will.
I’m not surprised, we acquired a new client from EJ, they had a AIG VA contract with additional “premium based charge” we’ve never seen before. Looked like a .50bps fee for just re-balancing every quarter. It’s also a proprietary VA we can’t take over as reps, to stop the “premium based charge” baloney. I’m not a blind VA hater, but considering it probably has a trail as well, adding another fee on top is excessive imo. Advisory fees over 1% are excessive in my book, and where we start, going down from there.
Acquired another small IRA account of about 100,000 from an “RIA Fiduciary” who was charging 2.25% management fee, and using third party management that included 17% in Muni Bonds….
Just because an “advisor” is “fee only” does NOT mean they do what’s in their clients best interest. Charging 2.25% plus third party management is pathetic imo. I’m still temped to send her statement redacted to the SEC or state dept because this stuff needs to stop. “Advisors” like this need to be put out of business imo. It’s why good advisors have to jump through so many regulatory hoops now to prove themselves.
Blunt, hope you didn’t liquidate that client’s AIG VA just because you didn’t understand it.
Jones-sold annuities are the LOWEST cost available through an advisor. Close to 20 years ago Jones negotiated LOWER COST share classes with all insurance companies they work with and made sure advisors weren’t paid more for an annuity sale than for a mutual fund sale. No other brokerage firm can make that claim. I was proud of the firm for that. (Sadly that ethical Jones doesn’t exist anymore.)
These annuities have lifetime income riders that protect income from market loss (and from outliving your income) which for clients that need that feature is a wonderful thing for that 1% or less they are paying for that protection (cheaper than Advisory and getting more to show for it.)
That AIG annuity likely had an income base that stepped up a minimum of 6% a year or whatever % the investments made. And unlike Advisory accounts, annuity sales are HEAVILY scrutinized at Jones and always have been so the Insurance FSD had to be convinced the client really would benefit from that investment.
And No advisory fees were charged by Jones for annuities.
Annuities cheaper than advisory? In what universe?
The universe ar edward jones. YES cheaper than advisory and more to show for the money spent in fees by the client.
Ok, how much are the total fees – visible and under the hood that are paid by the client? M&E, rider cost and internal expense ratio for a moderate model, please.
By your silence I take that as you don’t know. It’s close to 3% all-in. So the cheapest annuity is still roughly 100 bps more than the average advisory account. Keep selling the dream, buddy.
VAs are absolutely not cheaper at Jones. I was there. I know what they cost. A VA with an income rider would cost around 1.0% M&E and 1.0% for the income rider along with the 12b1 fee and mutual fund costs. Even if you charged the MAX Ed Jones advisory fee of 1.35, you are still saving .9% a year in advisory. At my new firm, I charge 1.0% flat for most advisory accounts. So they would be saving 1.25% per year in fees to have a fee-based account with me vs an annuity.
Lawsuit spot on! I’m a former FA from Jones. I’m 49 years old and made a lot of money in my 30’s in a family business. After I sold the family business, I had $ to invest and was referred to Ed Jones by a friend.
I was put in American Funds from 2009 until 2013 when fee based accounts came out at Ed Jones. My FA told me this would be a better deal for me and my family, I signed on. No gun to my head but a poor explanation by the Edward Jones rep and sub-par performance. In 2014, I was hired by Jones and after six months I realized how creepy the whole process was at their firm. Of course, not all FA’s at Jones do what they are being sued for but the FA that I had before I started as an employee did this to me. He collected $15,000 of A share commission in 2009 and then switched me to a Fee based account in 2013. The lawsuit is totally legitimate! Unfortunately, the people responsible won’t suffer. They will lawyer up and the small investors will get screwed.
Former Edward Jones Advisor
Hey, Ron, maybe you know where the list of Eligible Investments for Guided Solutions is. I’ve called local EJ brokers who masquerade as financial advisors, and I’ve called the headquarters, but nobody… NOBODY can tell me where this LIST OF ELIGIBLE INVESTMENTS FOR GUIDED SOLUTIONS is located. My sister’s EJ broker masquerading as a financial advisor sent her paperwork that said and I quote, “This account was created using investments that you have selected from the list of Eligible Investments for Guided Solutions.” How in the world could she have selected investments from the list of Eligible Investments for Guided Solutions when the list does NOT even exist? This is FRAUD. I caught it before my sister signed her documents. Eight investments had been selected for her. SHE DID NOT SELECT THEM. Who did? Was it her broker masquerading as a fiduciary financial advisor? FRAUD!!!
Muppet,
In those Guided Solutions accounts, the advisor has some (very limited) discretion to select the funds so the client’s consent is not required. There is a set list and they should be able to provide it. For me, I think the program sucks because the funds are good (none are proprietary) but essentially clones of each other. Not enough differentiation to make it worth it IMO and more problematic is that the “Investment Policy Committee” has set (VERY RIDGID) allocations given a client’s “risk tolerance” that I can’t–as an advisor with 20+ years of experience who actually knows how to manage money–deviate from AT ALL.
What a waste of time! People who wrote here have no clue. American Funds charge 5.75% under $25,000 versus fee based 1.35%. Now tell me which one is better for client? Also consider diversification, American funds do have some good funds, but there are many other good funds in the market. Why put all your eggs in one basket. The lawyers do not have all the information or simply fishing for settlement. Any client who switched from commissions based account to fee based signed the letter explaining that fee based will be more expensing in the future and reminding them how much they paid in the past. In addition, each client must had write the reason why they still want to switch to fee based. After Edward Jones wines, I hope they file fraudulent lawsuit against the law firm, who is clearly have no clue.
Dear Smith, so you have been a rep with EJ for how many years? Full disclosure please for everyone.
Your argument is so flawed it’s laughable:
1. The point is that the client already paid the up-front fee. Was told/sold that American Funds was GREAT (they are very good). And now you need this new fancy fee-based account (and o by the way, your carrying cost just went from basically the .25% 12b-1 fee to, per your post, 1.35%).
2. Even in your example, and of course you use the worst case situation, still the load has a break even of about only 4.25 years (5.75% on-time vs. 1.35% annually). What if said client invested $100,000? $500,000?
3. Again, client has already paid the up-front fee, sold to them when EJ made more money (and your branch was more “profitable”, thus you made more money). Remember, advisory fees were the devil at EJ for many many decades (fact not fiction) – then all of the sudden advisory fees are the gold standard.
Honestly, this suit is a layup even Sister Jean could not miss.
4. The conversation is not about new money, the suit is about reverse churning. And you and EJ can hide behind all of the “disclosures” you want – we all know clients usually never read them (or understand them), they “trust” their “advisor” to do what is in their best interest.
Now I’m not saying it’s right for people to not read and understand what they sign, but the fact that the pre-packaged portfolio they are put into includes some American Funds makes this all that much more laughable.
It’s not a matter of if these people win their suit or not, but how HUGE the award is going to be.
And AC, no, I don’t sell index annuities that pay a 20% commission. 🙂
I can only imagine how much money was moved from American Funds A-shares in recent years into these fee based accounts……if I was a betting man, I’d bet that it’s in the BILLIONS.
OMG, This whole thing is beyond unsettling. For 2 yrs my F/A has been pushing this Advisory Solution thing. I just can not sign it. From the beginning seemed just wrong to me–you know that intuition thing. Anyways, when I ask questions, he is very vague…I do not get truth answers…I tell him what I want and he steers me else where. I ask for options he gives me his. I tell him mine and he says not in my best interest. I believe my request is in my best interest. I am beyond frustrated!!! When I came across this blog and article today…well, I am very grateful. Instincts right on. I will not sign this paper work for Advisory Solutions…He states it is Mandatory. I will have to find a new company/advisor. Recommendations please. This Edward Jones Advisory Guided Solution is no solution it is a culty scam–and I am very disturbed that this is allowed to be happening to anyone.
Kris, take the time to find another advisor, then have them handle everything. You’ll never have to talk to your FA, who in his defense, probably feels the heat of EJ and then selling his own soul to keep his job.
Hey giddyup! thanks. I have been with EJ for over 30 yrs. Liked the other FA’s- were many that came and went through the years…I never really felt duped. When the new guy came in 2 yrs. ago…well…I felt unsettled…thought I would give him a chance though…Then onset of pushing the Guided and Advisory solutions came…push-push-I have kept the resist. Will not sign. Went and interviewed Raymond James, Fidelity since my post here. (over the weekend). I will be making a firm decision today to move out of EJ- not looking back. It can’t be any worse-right!? Most likely Fidelity will be my choice as I read through what each is all about. Both the folks I spoke with seemed well informed–operative word seems. We must always hope for the best in people. I just don’t like being taken advantage of–just like anyone. I hope for an easy transition–in-kind-transfer with out difficulty. I pray for all you guys and gals out there who are in this same place. I hope that you find an honest-good-helpful person and company that is and does the right thing in the best interest of their clients. What theses company’s don’t get is a little honey is better than no honey…spread a little wealth and goodness to all and the world will be a better place.
Kris, I went from Jones to RayJay and it was a great decision. Take another look at them before giving Fidelity the nod. The technology, research, investment platform, product line-up, and home office support are all great. I own my business and RayJay works for me. Best of all, they understand this relationship and work hard to keep you happy so YOUR book with them.
Thanks, Not Looking Back–I am still considering RayJay as you call it!. Our daughter moved her EJ account to RayJay last yr. She seems fairly content with her choice of RayJay currently. She came to the meeting I had with Fidelity–she liked what she heard and asked lots of questions–I am most certain which ever company is chosen…I will feel better than I do now about EJ. Wish us all good fortune and financial growth for the future that lies ahead. Be blessed, have peace–and enjoy your life -no matter what– God is in control and He has us in the palm of His hand–and ultimately He is the one who provides.
Chris- I commend you for standing up to conflicted advise or what is not right for you. When I was at EJs I had to advocate for my clients’ best interest and the message from “above” was always that “clients don’t know what is best for them”. It was sickening! I went there because having worked for a major WS firm for 7 years, I really believed that I would be able to “run my own business while doing what is best for my clients”. Boy was that false advertising on EJs part! It’s a pyramid scheme benefiting the partners and filled with conflicts of interest throughout.
Thanks former Edward Jones FA–You understand the culture of EJ…my intuition is my compass…I do read all the stuff the office sends, and I am capable of making my own decisions and I know what I want–once I get educated on it. I do read all fine print. When people don’t that is when they are led a stray. Read the fine print folks. There also is a true conflict of interest -the EJ rep is a partner. I found out. Even his BOA is under his spell. It has gotten worse over the past week. I asked for the list of choices with the Guided Solutions/Advisory so I could decide what I would choose. The list is only for Edward Jones Internal use–don’t worry about it we will take care of it for you. Just come in and sign the paperwork. Really–Really?!!!!!! NO WAY!!!! I have got to get out–honestly I am feeling abused–financial elder abuse…60 plus…help elder abuse…funny not really. They should be ashamed of themselves for all of this. Going to another company very soon. It can’t be any worse right?! I pray that God convicts them for their dishonesty of steering and reverse churning–this is deplorable that they can get away with any of it.
Kris,
Not all of us at Jones are on board with this. I have been a Jones advisor for over 20 years and I have ZERO advisory account conversions. None.
See if there isn’t a senior Jones advisor in your area. Those of us from “back in the day” are more likely to not push advisory. If you transfer to another firm, most all of them went to ONLY fee-based years ago.
The leaders in my region made a contest out of “annuitizing your book” by converting people to AS.
They would send monthly emails showing how much AUM had been converted from brokerage to advisory each month in an effort to get all of us on board with that mess. I read the literature on their ‘process’. The material read like they were tacking care of you ‘tactically’ but, in fact they were just ‘buying and holding’ until it became obvious holding a particular security was stupid. Anyone who bothered to look at model trade history could see this. I never converted a single account. The broker that took over my branch told my clients that stayed that I didn’t take care of them properly because of this. I sincerely hope this costs them upwards of a billion.
The transaction accounts in those firms (Morgan Stanley, Merrill, Edward Jones) are VERY expensive, unless you’re buying an ETF, Stock or Funds to keep them forever, without any changes in your portfolio for the rest of your life…
Now, the re balances are something that you should do at least once a year…if you’re doing that in a discount broker account that’s fine but, in a transaction account in one of these firms? It’s going to be a drag in the overall performance! So, I understand why the FAs are suggesting the fee based solutions…its LESS expensive (but I prefer to buy a few Vanguard ETFs myself!:))
As an EJ advisor for 15 years, I also have resisted most of the changes. I don’t feel like I have been pushed to move clients into fee based platforms. However I do know for a fact advisors are telling their clients it’s mandatory when it’s not. I also feel like they have put systems and procedures and minimums in place that make it very hard to do anything else. Grandfathering the accounts until we knew what was going to really happen was a mistake. Then they compounded it by enforcing minimums. At first a client had to have 100k in IRA assets to open a transaction account. That has come down to 50. Regardless people with less than those amounts at the time and wants to sell a stock in a grandfathered account has no way to reinvest besides a fee based account. A new client wants to start an IRA with their 5500$ No option, fee based only. These changes were sold to us to us by the Home office as “choices” when in reality they restricted choices. It is telling that when we had our winter region meetings in March, they were essentially a training seminar on how to explain and justify our higher fee structures. Those that have resisted the changes have been labeled cancers to the region and some have been told directly that they won’t have leadership opportunities if they continue to go against the home office. I doubt this particular lawsuit will go anywhere though. reading the actual complaint makes it seems pretty ridiculous. One example has guy paying 6k in fees in two years on a 60k account. We know that didn’t happen. It continually uses the words scam and scheme…that’s hard to prove. But hopefully it’s a warning shot to the home office and industry at large and they get back to doing what’s right for clients and not the GP return or stock price.
We had to grandfather IRA because of DOL Rule. I think, the original deadline was April 9, 2017 then Trump extended until July 9, 2017 then BIC only was extended until July, 2019. At least our clients can keep grandfathered IRA, whereas Meryl moved a lot of smaller accounts to call center or charged fees on all IRAs. I think this lawsuit will eventually decide if our interpretation of DOL Rule was correct. I think it was. EDJ lawyers were in constant communication with DOL. Your statement on regional push towards fee based practice is BS. Leadership positions are voluntarily and pain in the neck, nobody wants to do them, and a lot of people try to avoid them.
I do think it’s also ironic that nobody complained about their accounts or fees when they were making money hand-over-fist in 2017. Now, all-of-a-sudden, the market is down 12 % and there’s a beef? A litttttttle too coincidental and I think that’s where the plaintiff case takes on water.
This lawsuit had to be in the works for at least a year. Read the complaint. VERY detailed and thorough. No whining about market loss here at all.
Joe, Go back and re-read that complaint again. It doesn’t say the client had a $60k account. It says the client had 60k of his total account in Bridge Builder funds. The fees cited are on the TOTAL account the amount of which is not given.
I think these attorneys have really done their homework and IMO they have nailed it. Our own bragging in our financial reporting about our account conversion and our “coverage ratio” will be our undoing.
Yes, using language like “scheme” isn’t tasteful but guess what? We as a firm sold our soul for Advisory fees. And our once pretty stellar reputation is about to go down in flames.
I am wondering this–with so many folks in the United States that do invest with EJ–why are there not more comments on this site. Most likely they are not aware!!!! Why are they not aware of what is happening with the company they are investing in!!! Are people just giving there hard earned money away for someone to take advantage of them –especially in this Guided Solution/Advisory scam. Way to complicated in how they-EJ never tells the same story twice–they try to confuse. Investing should be made easy…should be straightforward–no games. More people would invest if it were made easier and the companies would still make gobs of money…every body would win. So simple. All those ways of charging are not needed. Keep it simple stupid approach would be beneficial to all people. I wonder what Warren Buffet thinks if he is aware of this. Warren if you are out there reading this, please respond for us all. We need your “Guided Solution” approach–the honest man with integrity and knowledge of investing. If there is one person in the world I could sit down with, it would be Warren Buffet for sure–his wisdom would mean so much for all of us on this thread/blog. The investment world needs a change to true transparency and honesty. Lets start a new movement called # No Hidden Agenda-Full Transparency-Honest Investing For Future Faith, Family, Fun, Financial- Fiscal Folks!!! Put Honestly into investing and everyone can have some fun and reap some great rewards for their retirement years and other life goals. I am saying good bye to EJ this week. It will either be Fidelity or RJ–leaning more towards Fidelity–feeling a little more peace about them. Have done tons of reading in the past few days –and all that fine print. My eyes are buggin. I hope the best for all of you current investors and the new folks coming in to this world. I am not one with deep pockets–but the pennies add up –a little is more than nothing –and I don’t want to be taken advantage of. I have made an effort towards my future financial goals-although small it will grow and this is why I feel so strong about not being taken advantage of by a company, FA. So see ya EJ–I am on to greener pastures and I am feeling really great about this decision.
Jones blankets the internet with enough propaganda that most clients and potential clients only see the stuff Jones puts out.
You know, it’s not so much that advisory accounts are bad. It’s the whole philosophy and series of 180’s and bold-faced lies at Jones that is disgusting.
At Edward Jones, they said for years that advisory accounts were the devil…until they weren’t. They said that proprietary mutual funds were the devil…until they weren’t. They would award “Diversification Trips”, which were really just sales contests (I was there – that’s all the were – sell enough of this, this, and this, and you will get a free trip). They had their “preferred” funds, which were really just strategies for getting massive kickbacks. And try using funds outside of the “Preferred Fund” families. Good luck getting any information on them. The 7 Preferred Fund families were basically the only wholesalers you could talk to, and the only funds you could get formal information on. It basically makes it impossible for their rookies (which are like half the firm) to sell any other funds, because they have no idea what they are doing.
It is completely and entirely a “sales” organization. All of their training is sales-based, not financial education-based. I even had veterans tell me early on “don’t bother with the CFP, it’s not going to help you sell”. The mantra in the firm was that the CFP stood for “Can’t F!@#$’ing Produce”.
Goodness-Gracious–I read the all the wonderful and insightful thoughts and opinions of this thread–The investment world is confusing to say the least! Wanting to jump ship from EJ to either Fidelity or RayJay–have had meetings with both in the past week. What I think at this point, (my head spinning from all their jargon), is that I am coming to believe they, the companies and FA’s are very similar in so many ways with a minor this or that, that really in the long run does it matter–This should be such an easy thing to invest. It is complicated. Maybe just throwing your money in a Credit Union/ bank-CD’s, or under the mattress maybe the best thing and easiest thing.Even with the interviews of the other company’s and FA’s–it sounds and looks too similar. I realize a decision has to be made–my stomach is in knot;s–non of it feels right at this moment. I am gonna take a step back, take a breath for a few days–and will have to make a “Best Decision”. The investment part-giving the money to institution is easy — picking the vehicle-Fund may be easy-when you start getting into the fee structures, and tax stuff….this is where the nickle and dime-ing takes place–I realizing have money to invest is a responsibility. Too many people in the industry want to take advantage–this has and is happening to me and many others–just more protection for the little guy trying to save for his or her future- a set minimal charge for investing across the board would be nice–IN A PERFECT WORLD.
A set minimal charge for investing like a flat set managed fee? #irony
JR – you are right on. You tell it exactly how it is. The only thing missing from your commentary is the “claim” by EJ that “they do not have any proprietary products”. They do – they make the big companies create this special shares so that only EJ can hold the asset – for example Transamerica Annuities. The O share is “marketed” to EJ advisors as being “better for the client”. In reality it means that only EJ can hold the annuity. So if the FA moves or the client wants to close their accounts, they still have to leave the annuity in an EJ account. I know first hand because I own one of those annuities. When I called Transamerica and complained, I was told that “the FA should have received training on this and told you (the client) the effect of buying this annuity from Edward Jones”. Well, I was there, i got the training from EJ and the Transamerica wholeseller – Neither told me that my clients would be stuck with EJ for as long as they own this product. The only way out is by paying substantial penalties.
I was on Wall Street on the sell side for 17 years before going to EJ. I believed their sales pitch. I really believed that I was joining a moral company that put the client first. But when I got there I started seeing the truth and how conflicted the company’s policies are.
Former, The “O” Share annuity can’t be held by other firms because none of them wanted to offer it. Those annuities are super low cost. The point of the O share was not to chain clients to Jones forever, it was to make sure clients paid less and that Jones advisors weren’t compensated more for annuities than mutual funds (like they are still at other firms.) Other firms still put their clients in versions of those products that are nearly DOUBLE the cost of O and A share annuities acquired through Jones.
I’ve been proud to tell clients that I had “no dog in the hunt” for recommending to them a product that will cost them more than other investments to own. I was happy to tell my clients that wasn’t recommending it because I was getting paid more. I’ve always presented the alternative “no insurance” mutual fund or stock/etf options.
This firm WAS an ethical place worthy of investor trust. That decision on annuities was made almost 20 years ago and I was proud of the firm for doing the right thing. THAT was the Jones I knew.
You can take Transamerica O-share annuities with you. I have transferred the few that I sold while at Jones. As long as your new firm has a licensing agreement with Transamerica, they can be transferred. The O-share sales structure is irrelevant.
How would I really know if Edward Jones put me in any kind of annuity–I have always been against any annuity–and have told advisors so…What would I look for on my statements that would tell me they placed me in annuity. I can tell you this–they would not have my permission to do so—please what would indicate on my monthly statements. HELP please I am freakin out about this–especially because I want to change investment companies and am in the process of doing so…I want nothing left behind with EJ nor do I want to deal with the unethical F/A presently.
Rest a sure the Edward Jones would not purchase an annuity in your account without your knowledge. You would know if you were in an annuity and you would’ve had to sign a bunch of documents.
I too was against annuities s an advisor but years ago but when Jones negotiated dramatically lower fees with the insurance companies they became great investments for the clients who need income protection or tax deferral. These are not the crappy annuities of the past that Suze Ormand drones on about.
If you’re going to spend $ on fees for your account, at least having some insurance against market loss and a death benefit is a very good thing not to mention tax deferral.
If you don’t see n annuity on your statement I’m sure you’re not in one.
JD I would also like to add that the firm overall had been client-focused until this huge blunder. I wouldn’t freak out and change just because of the discussion on this board. If you haven’t been converted to an advisory account, then I’m guessing your advisor’s doing good work for you. Except for this horrible decision to convert existing accounts to advisory and to make those investments in proprietary funds, Jones has truly endeavored to do the right thing for clients.
Absolutely none of my clients were converted to these expensive fee-based accounts. There are many of us of Jones who did not go that route. And I hate to tell you this but switching firms you will only have fee-based accounts at other firms with advisers. So maybe do a little research have a meeting with your advisor and find out where you’re rwally at before you jump ship.
Hi FA –We are grandfathered in. The Roth money for 2018 is being what I called “held hostage” until we sign the paperwork for one of their Guided Solutions–this is where I got angry….grandfathered in or not –I was happy the way it has always been–now I am asking for the list to see what funds I am able to choose. They say in house only–this statement says to me—they will be choosing and these are their proprietary funds–that I don’t have a choice–funds that they have determined that will make them tons of money. Really why are they grand fathering anything—only for their benefit –it will not benefit me. This is my hard earned money and I want to be making my own choice—my FA says it is because of the DOL–my FA is a partner–lots of conflict of interest. It is impossible for my FA to be a fiduciary –he is a partner, he is a true company man (30 Years old)–just a kid really– that drinks the Kool-aid–lives the high life–is always on vacation, doesn’t return calls, and is never at the office—What is your opinion of this to any FA’s out there!!!!
Short, sweet and simple. Time to find another FA. There is absolutely no excuse for a FA to not return calls and to not be in the office on a daily basis. Cannot run a successful business in that manner. You are not receiving good service. Run for your life!
A decision has finally been made-for now anyway!!! Edward Jones acct. is being moved to Raymond James-pretty much as I write this -to one of my past Edward Jones FA’s. With that being said–I hope all goes well with transfer in kind…and I will see how this all goes down. I had interviewed Fidelity and this Raymond James office–knowing the FA and BOA from before –their was a comfort–however, I will be cautious and watchful as time goes along. If at any point I even think for one second this whole change is going south–I will then try Fidelity. I will be hopeful and positive –as I make this big change. As I said earlier in this blog. I have been with Edward Jones for 30 yrs. I have seen the FA’s come and go–I stayed on and was loyal — I really wanted to stay the course with Jones–however, I did not like the guided solutions/advisory fee’s at all–I thought after being with them for 30 Yrs., that maybe they saw the loyalty aspect and would just let me remain status quo. There really is so much more to this whole Jones thing, the FA, the BOA –I never felt they cared one bit. That bothers me alot. The one thing I can say is this the FA at Ray-Jay, I have a little history with as well as his BOA–and they were super-duper–they did go the extra mile-they would call to check in, say Hi, send a birthday card–really great people. So, I do believe this will be a positive change. I do feel for the EJ guy–this will be a loss for him, his family, and the BOA–who I never had one iota of contact with–never saw her or heard from her ever…no customer service at all.So sad –my heart is aching for them in many ways. I tried to ask for what I wanted and couldn’t get it from the EJ guy. I wanted my portfolio as it had always been-period. The guided/advisory solutions thing–was my breaking point–and when on the weekend I received a letter from Jones saying they were going to liquidate my account If I did not sign up for the Guided/Advisory Solution–that was the straw that broke the camels back for me. So Monday I visited my past FA and BOA who now are at Raymond James–not too far from the Edward Jones office–was with them about 2.5 hours talking. Took the evening to think–do I choose Raymond James and the FA/BOA that once served me well-or try Fidelity. This am the decision was made to go with Raymond James–and with that made a promise to myself–if this does not work –I am hopeful it will be great, really great.In 1 year I will see how things have gone–and if it turns out like EJ then I go another direction—I am so hoping this move to Ray Jay will be a great decision for me.
Sometimes media embellishes or misses on important details. Everything in this article is accurate. I’m leaving EJ soon after 10 years there. Not the same company I signed on to work with.
You won’t know until you’re at your new place how terrific the decision you have made is…you’ll understand in about 3-6 months. Congratulations and an early welcome to the world outside of the green dome!
Colorado, would you mind elaborating on what has changed at EJ to have you leave there? I’m considering an FA position there and, frankly, I haven’t found anything that seems particularly concerning. The only negative issues I’ve been able to dig up in my research on the firm are only on comments here. I’d love to hear your thoughtful pros/cons (it can’t be all negative, right?) of the place.
Danno, in short, they’ve changed their focus from the client and FA to the checkbook only. All the things they do, they have a story of how it benefits you and the client, but in reality it’s for the bottom line and the GPs. I’ve heard second hand what certain high level folks have said to reinforce that notion. I could list several things that the home office tells you is for your benefit, but in reality it’s so they can kick your rear out the door and crush you so they keep as many assets as possbile. Just one example, they push the assistant (BOA) to establish a relationship with clients so they can coerce the assistant to stay and have a shot at retaining clients. And who gets credit for the BOA bonuses–1/3 advisor, 2/3 home office. I’ll leave it at that, but could list many others. Culture has changed, not for the better. Penny won’t change it either most likely. Happy retirement, Jim! Don’t let the door hit ya!
Does anyone know the attorneys or firm that worked on this lawsuit? I know someone that would like to initiate another suit against EJ.
Cindy, it’s in the last paragraph of the email: Franklin D. Azar, “The Strong Arm” firm in Denver and Ivy Ngo (phone 303-900-5595) , and the California firm Garner Law, (phone 530-934-3324.) Good luck…
I just received a letter that basically said my account is no longer grandfathered. This allows me to make changes, buy stock, transfer investments, invest in dividends…
A year ago I got several aggressive calls on my account that is over 20 years old. In 20 years I was only ever contacted for my yearly fee. I was told that the government was forcing me to make changes and I was legally required to do reviews fill out forms and pay a $300 fee to get more return. I said I don’t want a review leave it all the same. I refused the fees, although I was told I couldn’t. EJ threatened to transfer my account if I didn’t pay the $300 and fill out the “climate forms”
At the time my son was being tested for leukemia and I explained that this is not the time for me to make decisions on this account. (He does not have leukemia but was tested for a year.)
Ultimately, I felt in my gut my EJ rep was not being honest. I stuck with my gut on this topic.
I was told as a young lady ‘put your money here, leave it alone, you don’t have to do anything.’ That is what I have done for 20 years.
I have a few other accounts that are matched by employers that I pay fees on.
I have repeatedly said I don’t want to do anything to this account, leave it alone.
The amount in the EJ account is not a lot to many, but every penny counts in my world. I agree that EJ should make money and pay a yearly fee. I do not want to pay additional services I do not wish to use.
I looked up the info in the letter and found this article. It explains the change in attitude.
The letter makes it sound like they are doing me a favor. Now with this letter, I feel they have forced the issue and a gun is to my head.
I see you are mostly advisors, but I add this for you to consider the poor schmucks that are impacted.
You can contact the fund company to discuss hoding it directly with them. Fees will be cheaper and you won’t get any unwanted advice.
CJ, the first thing you must do is write a letter to EJs with your complaint. You can address it to your current FA and send a copy to Penny Pennington and Kevin McBride in St Louis (both partners). By putting it in writing they have to investigate your complaint- as per SEC requirements. The FA who receives the letter is required to report the written complaint to compliance. And so will the two partners that I noted. By sending the letter to these 3 people they will not be able to say that they never got your letter. They hate getting things in writing so send a letter and also emails. Explain everything you have been told, ask for evidence of your signature agreeing to change your investments to a managed accounts and to the fees – If you had you would have copies of all the documents you signed. Also, your account would have been changed from what it was before to what it is today and all the fees would have been disclosed upfront. You also would have signed a document setting the guidelines for investing your money – ie Type of Mutual Funds and ETFs if you chose those too. They are required to give you a copy of the documentation any time a new account is opened so be sure to ask for what they claimed you signed. You would know because the document is very lengthy. The product when I was there was called “Managed Solutions”.
When you begin calling to follow up on your letter, make sure you keep notes of who you spoke with, when and what they told you. They will promise that someone will get in touch with you etc. When they don’t , call again. Also instruct your current FA in writing to cease any activity in your account. All of this you will be able to use later to defend against their lies and if you have to join the lawsuit. But first, advocate for yourself directly. I hope this information is useful,
Thank you GM so much! I will do just that! Thank you so much. I’ll start in the morning and get this going. I’m so scared because I don’t have much money left and I feel completely betrayed right now and very angry. CJ
This is not going to be easy