Merrill Lynch or Edward Jones??

[LOL!]

I'm now curious ...

But if you've got a bunch of long term muni bonds ...

What am I missing?

How do you know if you get a fair price when you buy or sell a bond? The mark-ups and mark-downs on these things are horrendous since they are not that transparent to the retail investor. If the broker skims 5% from you, would you even know it?

 

[rodi]

If you think it's pennies... consider this example presented by the department of labor. The article is talking about fees on 401ks, but it applies more broadly.
A Look At 401(k) Plan Fees

Why Consider Fees?

In a 401(k) plan, your account balance will determine the amount of retirement income you will receive from the plan. While contributions to your account and the earnings on your investments will increase your retirement income, fees and expenses paid by your plan may substantially reduce the growth in your account. The following example demonstrates how fees and expenses can impact your account.



Assume that you are an employee with 35 years until retirement and a current 401(k) account balance of $25,000. If returns on investments in your account over the next 35 years average 7 percent and fees and expenses reduce your average returns by 0.5 percent, your account balance will grow to $227,000 at retirement, even if there are no further contributions to your account. If fees and expenses are 1.5 percent, however, your account balance will grow to only $163,000. The 1 percent difference in fees and expenses would reduce your account balance at retirement by 28 percent.

So 1% extra in fees costs you 28% over 35 years. That's real, tangible, and significant.

 

[REWahoo]

If you think it's pennies...

But Rodi, it's still only pennies...6.4 million of them in your example, but still only pennies.

 

[bssc]

That's why I dislike those target date fund of funds. Not only are you paying a management fee to some group to determine which mutual fund to invest in, if you read the prospectus closely, you are also paying the management fees for each individual mutual fund. The annual fees added up came out to about 2.5% a year. Of course, with those fees, they were nice enough to waive the fees to purchase the shares.

 

[rodi]

But Rodi, it's still only pennies...6.4 million of them in your example, but still only pennies.

You're so right!

 

[Animorph]

That's why I dislike those target date fund of funds. Not only are you paying a management fee to some group to determine which mutual fund to invest in, if you read the prospectus closely, you are also paying the management fees for each individual mutual fund. The annual fees added up came out to about 2.5% a year. Of course, with those fees, they were nice enough to waive the fees to purchase the shares.

No! Vanguard's TD 2045 charges 0% for the top-level fund, and the underlying fund's ER's average to 0.19%. While I'm sure someone offers an ER of 2.5% to some captive audience, the major companies will be competative with typical ER's.

 

[bssc]

No! Vanguard's TD 2045 charges 0% for the top-level fund, and the underlying fund's ER's average to 0.19%. While I'm sure someone offers an ER of 2.5% to some captive audience, the major companies will be competative with typical ER's.

Unfortunately, those are not options for us and since it is a 401(k), I want to keep my money in there for 55+ withdrawal rather than roll it into a IRA and deal with a 72T.

 

[67walkon]

Don't know, LOL, but at least I'm better educated..

 

[clifp]

But if you've got a bunch of long term muni bonds that aren't being wildly traded, and some dividend paying stocks that don't get bought or sold unless you say so, and if EJ or ML or whoever waives any annual fees, how do they do screw us? The kind of young EJ guy that handles our office 401k and our stuff for now told me that if I really want to actively trade, I should get an E-trade account because it would be silly to pay EJ the higher commissions they charge. I liked that advice.

Maybe it depends on the person at the EJ or ML or whatever branch you're dealing with. While the young guy we're dealing with for now has taken a couple of half hearted runs at selling us something we don't want, he hasn't been pushy.

Maybe when I'm fully out of the work place, I need to seriously re-evaluate. But at the risk of being called a knucklehead or worse, I haven't seen any major screwing from this particular EJ guy in the 4 or 5 years we've had accounts there. What am I missing?

You raise a reasonable point. You'll pay a higher commission to buy the dividend stocks, an almost certainly a higher mark up for the bonds. However, if you are not actively trading and don't have money in the hot ML or American Fund of the month, then you probably aren't spending a fortune sticking with EJ or ML. Especially if they are waiving the annual account fees, custodial fees etc etc. More like paying an extra percent or two when you buy or sell but not every year.

On the other hand you are paying for a full service broker and they are suppose to provide you valuable investment advice. If you aren't taking their advice and buying the stuff they recommend aren't you really being a DIY investor?

 

[obgyn65]

For what's it's worth, I like the quality of service I get at Edward Jones. Others will disagree...

How do I choose? Does anyone have any bad or good experiences with either of these firms?

Thanks in advance for any help.

 

[ERD50]

For what's it's worth, I like the quality of service I get at Edward Jones. Others will disagree...

Not agreeing nor disagreeing, but I'm curious how you measure/determine that you are getting 'quality service'?

-ERD50

 

[obgyn65]

Well I always get an answer within 24 hours. Granted my portfolio is very simple. The online statements are very clear. It's not been always the case from other financial institutions. And all this free, as long as I keep a couple of thousand dollars in my money market. I am happy with EJ.

Not agreeing nor disagreeing, but I'm curious how you measure/determine that you are getting 'quality service'?

-ERD50

 

[LeavingOhio]

I will jump on the Vanguard bandwagon. They have the reputation as the best and with low fees. I have accounts with Vanguard and Fidelity, and both are fine, but if going with just one, I would choose Vanguard.

 

[marko]

That's why I dislike those target date fund of funds. Not only are you paying a management fee to some group to determine which mutual fund to invest in, if you read the prospectus closely, you are also paying the management fees for each individual mutual fund. The annual fees added up came out to about 2.5% a year. Of course, with those fees, they were nice enough to waive the fees to purchase the shares.

That is not true with TR Price.

You pay only on the main fund, not the fund's funds. My expense is 0.65% on their 2015 fund of funds. My total portfolio expense is 0.67%. I"ve dug down on this at one point and that is what I pay.

 

[clifp]

Well I always get an answer within 24 hours. Granted my portfolio is very simple. The online statements are very clear. It's not been always the case from other financial institutions. And all this free, as long as I keep a couple of thousand dollars in my money market. I am happy with EJ.

Interesting I generally get answers to questions within 10 minutes from Schwab sometimes 20 minutes once in a blue moon it takes a day. Plus my questions aren't always simple.

 

[Dawg52]

Interesting I generally get answers to questions within 10 minutes from Schwab sometimes 20 minutes once in a blue moon it takes a day. Plus my questions aren't always simple.

Email or phone questions? At Fidelity it can take a few hours if I do it online, phone questions are answered on the spot unless it is something unusual. Which is rare in my simple world.

 

[ERD50]

For what's it's worth, I like the quality of service I get at Edward Jones. Others will disagree...

Not agreeing nor disagreeing, but I'm curious how you measure/determine that you are getting 'quality service'?

-ERD50

Well I always get an answer within 24 hours. Granted my portfolio is very simple. The online statements are very clear. It's not been always the case from other financial institutions. And all this free, as long as I keep a couple of thousand dollars in my money market. I am happy with EJ.

Interesting I generally get answers to questions within 10 minutes from Schwab sometimes 20 minutes once in a blue moon it takes a day. Plus my questions aren't always simple.

Email or phone questions? At Fidelity it can take a few hours if I do it online, phone questions are answered on the spot unless it is something unusual. Which is rare in my simple world.

Well, getting timely answers to simple questions is one measure. But considering the other responses, that isn't unique to EJ (sounds like they may be inferior in that regard), and 'quality of service' extends beyond getting a phone call response. As I understand it, there are relatively high fees wrapped into what they offer - those office people have to eat. But what quality is that for the investor?

-ERD50

 

[obgyn65]

Well it's good enough for me... but I am not financially savvy, my investments are very simple (CDs, munis). Therefore I may tend to be happier with financial services that others in this forum may perceive as poor quality services simply because they are more demanding. Not sure.

Well, getting timely answers to simple questions is one measure. But considering the other responses, that isn't unique to EJ (sounds like they may be inferior in that regard), and 'quality of service' extends beyond getting a phone call response. As I understand it, there are relatively high fees wrapped into what they offer - those office people have to eat. But what quality is that for the investor?

-ERD50

 

[Nords]

Well it's good enough for me... but I am not financially savvy, my investments are very simple (CDs, munis). Therefore I may tend to be happier with financial services that others in this forum may perceive as poor quality services simply because they are more demanding. Not sure.

OB, you're happy with them because you don't see how much money they're making on the spreads when you buy the munis.

You're also happy with them because they're not making any money from you on trading stocks, annuities, or other expensive products. In fact I would suspect that they've given up on calling you to offer you "special deals".

You're also happy with them because you don't need to ask them for advice very often, and because you have a very straightforward asset allocation.

It's not that we're demanding. It's that you've simplified your demands to the point where you can remain happy because you need little. Frankly you're EJ's nightmare customer and the only reason they keep you on board is because it would cost more money to get rid of you.

On the other side of the issue, I know a woman who is staying with EJ because her grandfather and her father used EJ as their brokerage. She knows nothing about stocks or mutual funds and figures there's no reason to mess with decades of EJ's service. She's also very happy because she has no idea how much her blissful ignorance is costing her, but she never paid any money for the shares so it doesn't have any significance to her. I suspect that she and her spouse will be working until the day they die, but that's a whole 'nother thread. Bottom line is that they never "need" financial advice, either, so EJ works perfectly well for them too.

 

[Rustward]

OB, you're happy with them because you don't see how much money they're making on the spreads when you buy the munis.

You're also happy with them because they're not making any money from you on trading stocks, annuities, or other expensive products. In fact I would suspect that they've given up on calling you to offer you "special deals".

You're also happy with them because you don't need to ask them for advice very often, and because you have a very straightforward asset allocation.

It's not that we're demanding. It's that you've simplified your demands to the point where you can remain happy because you need little. Frankly you're EJ's nightmare customer and the only reason they keep you on board is because it would cost more money to get rid of you.

On the other side of the issue, I know a woman who is staying with EJ because her grandfather and her father used EJ as their brokerage. She knows nothing about stocks or mutual funds and figures there's no reason to mess with decades of EJ's service. She's also very happy because she has no idea how much her blissful ignorance is costing her, but she never paid any money for the shares so it doesn't have any significance to her. I suspect that she and her spouse will be working until the day they die, but that's a whole 'nother thread. Bottom line is that they never "need" financial advice, either, so EJ works perfectly well for them too.

 

[FinanceDude]

OB, you're happy with them because you don't see how much money they're making on the spreads when you buy the munis.

You're also happy with them because they're not making any money from you on trading stocks, annuities, or other expensive products. In fact I would suspect that they've given up on calling you to offer you "special deals".

You're also happy with them because you don't need to ask them for advice very often, and because you have a very straightforward asset allocation.

It's not that we're demanding. It's that you've simplified your demands to the point where you can remain happy because you need little. Frankly you're EJ's nightmare customer and the only reason they keep you on board is because it would cost more money to get rid of you.

On the other side of the issue, I know a woman who is staying with EJ because her grandfather and her father used EJ as their brokerage. She knows nothing about stocks or mutual funds and figures there's no reason to mess with decades of EJ's service. She's also very happy because she has no idea how much her blissful ignorance is costing her, but she never paid any money for the shares so it doesn't have any significance to her. I suspect that she and her spouse will be working until the day they die, but that's a whole 'nother thread. Bottom line is that they never "need" financial advice, either, so EJ works perfectly well for them too.

Boy, you are getting bitter with age........

 

[ERD50]

I don't think this is dead horse beating. In another thread, obgyn thanked the forum for making him aware of some info he did not know about (SS rules). Could have been an expensive omission.

I still do not think he is aware of the costs of dealing with EJ. I don't know myself, but as others have said, I suspect there are spreads on those bonds he buys/sells, or other costs that are not outright listed as 'fees'.

From recent posts, I'm still unsure if he's adjusted his WR for his conservative investments - IIRC, we discussed that a 100% fixed brings you down to ~ to 2.8% for a 30 year 95% success.

-ERD50

 

[haha]

It could be that an educated, well to do person like OB-Gyn is certainly capable of asking for information when he wants it. And declining suggestions when they do not interest him.

Ha

 

[ERD50]

Doesn't it ever occur to people that an educated, well to do person like OB-Gyn is certainly capable of asking for information when he wants it? Obviously, he does not want the type of information being so freely supplied.

Ha

It's my experience that some educated, well to do people are ignorant in some areas (that is the dictionary definition of ignorant, not 'stupid'). Same is true of uneducated, poor people.

Maybe I'm different, but if someone can help me by providing information that was unknown to me, I appreciate it. In some cases, I'm even convinced that I 'know what I know', and a persistent person eventually convinces me that my beliefs were mistaken. Then my life is better for it.

Regardless of the poster this was directed at, there are other posters/lurkers who might benefit by being skeptical of the costs of dealing with EJ or other FAs. If all they see is "I'm happy with EJ, and they are free", they might come away with the wrong impression.

-ERD50

 

[haha]

You may be right. I have put myself into more social difficulty by offering advice than I have from witholding advice. But as they say on the internets, YMMV!

I am certain that Edw. D. Jones can be expensive. I know this because at one time I had a friend who knew nothing about investing who became an EDJ agent and very soon started making good money. Enough money that I was tempted to try it myself. I realized that I am too much a principle and not enough an agent for something like this.

Ha