Fidelity: Anyone here ever let them manage your money?

[FinanceDude]

I assume Edward Jones and Northwestern Mutual reps get more kick backs from other fund companies besides Fidelity. And there is the "keeping up appearances" of (a) not selling fidelity funds, because then clients may wonder why not just go to directly to fidelity for money management and (b) why is my adviser sticking me in more expensive Fidelity Adviser funds with loads instead of the equivalent Fidelity counterparts without loads.

You really think the REPS get kickbacks? As far as Fidelity Advisor Funds goes, I think they will sell that division in the next 5 years to someone else. The internal conflict there is getting worse each year. BTW, the "soft dollar" amounts you are referring to DO NOT go to the reps, they go to the brokerage firm of the reps. This practice has been going on for years, but the new financial reform bill will probably kill it, and that's not a bad thing at all.

FWIW, if someone wants to manage their own money, they go direct to Fido or VG anyways, they don't call an advisor. Advisors can use Fidelity no-loads but many do not............

 

[FinanceDude]

BTW, here's their current fee structure:

Fidelity Investments: Fidelity Private Portfolio Service Cost

Wow, that's high!

 

[FUEGO]

You really think the REPS get kickbacks? As far as Fidelity Advisor Funds goes, I think they will sell that division in the next 5 years to someone else. The internal conflict there is getting worse each year. BTW, the "soft dollar" amounts you are referring to DO NOT go to the reps, they go to the brokerage firm of the reps. This practice has been going on for years, but the new financial reform bill will probably kill it, and that's not a bad thing at all.

I thought the reps that have their own Ed Jones office get some of the kickbacks? I guess technically their firm gets the kickback, but since they own their own profit center or franchise, they end up getting the kickbacks.

 

[FinanceDude]

I thought the reps that have their own Ed Jones office get some of the kickbacks? I guess technically their firm gets the kickback, but since they own their own profit center or franchise, they end up getting the kickbacks.

No, corporate controls everything. Most Ed Jones reps get monetary help from the home office in their first 2-3 years to get them up and running. After that, they have to meet production requirements to get the money. On top of that, most Ed Jones reps make the same payout percentage as a wirehouse advisor, but pay their own bills.

One of these days I am going to break down an A share mutual fund purchase and show what the advisor gets W-2 wise. Not as much as folks on here think.........

 

[FUEGO]

No, corporate controls everything. Most Ed Jones reps get monetary help from the home office in their first 2-3 years to get them up and running. After that, they have to meet production requirements to get the money. On top of that, most Ed Jones reps make the same payout percentage as a wirehouse advisor, but pay their own bills.

One of these days I am going to break down an A share mutual fund purchase and show what the advisor gets W-2 wise. Not as much as folks on here think.........

Hey, I know they don't get the whole 5.75% load or whatever. I think the guy I used to use at Edward Jones told me it was around 34% of the sales commission on A shares that they received. No idea if that was net or gross of their office expenses.

 

[FinanceDude]

Hey, I know they don't get the whole 5.75% load or whatever. I think the guy I used to use at Edward Jones told me it was around 34% of the sales commission on A shares that they received. No idea if that was net or gross of their office expenses.

Say its 5.75%. The mutual fund company keeps typically .50% and then 5.25% goes to the broker-dealer. Then the broker-dealer applies a production grid to the commissions. 34-40% is about average for Ed Jones, some firms pay more or less.

So, on a $10,000 sale, the client pays $575 in "load', and the advisor gets a gross commission or 1099 income of $210, or 40% of $525. Then he/she pays expenses for the office and things out of that, along with taxes. The mutual fund companies and broker-dealer make out the best in the current environment......... After expenses and taxes, the rep probably nets about $130 or so.........

The reality is much different than many realize..........

 

[clifp]

Say its 5.75%. The mutual fund company keeps typically .50% and then 5.25% goes to the broker-dealer. Then the broker-dealer applies a production grid to the commissions. 34-40% is about average for Ed Jones, some firms pay more or less.

So, on a $10,000 sale, the client pays $575 in "load', and the advisor gets a gross commission or 1099 income of $210, or 40% of $525. Then he/she pays expenses for the office and things out of that, along with taxes. The mutual fund companies and broker-dealer make out the best in the current environment......... After expenses and taxes, the rep probably nets about $130 or so.........

The reality is much different than many realize..........

That is pretty much what I figured roughly the same split as Realtor gets on his 1/2 of a 6% sale unless they are both the buying and selling agent.

The nice thing is that really isn't that much more difficult to sell a 100K mutual fund than it is to sell a 10K. (Although generally the load drops a bit.)

What I really would like to know is how much the adviser collects on 1% warp account. That to me is where the money is really good.

 

[FinanceDude]

What I really would like to know is how much the adviser collects on 1% warp account. That to me is where the money is really good.

Depends on the place:

Banks: 28-35% (firm pays expenses)
Baird/Piper Jaffray/Ed Jones: 40% (firm pays their expenses, Ed jones gets monetary support depending on production levels)
Wirehouses: 40-50% (firm pays their expenses)
Independents: 70-80% (pay their own expenses)

So, yes, wrap accounts pay a lot more to the advisor, which is why every person out there who can pass a test that takes 2 days to study calls themself a "financial advisor"...........

 

[73ss454]

FD, do the advisors really spend that much time getting ready for the test?

 

[misanman]

What's the test? Maybe I can free up a couple days next week.

 

[haha]

The last ten years should have taught us that "I need to get my money working" is an inept metaphor. Invested money doesn't really "work", other than when it is lent at interest in short term governments. Everything else is in fact a speculation. Perhaps a good one, perhaps a bad one. You very likely are not in a postition to have much idea which is which.

Make your self a short term CD ladder, maybe out to 3 or even five years, with maturities frequent enough to handle your cash needs. And keep a reasonable cushion in immediately available funds- Discoverbank has a savings account at 1.30% or so, that can be accessed at will. Their CD rates are not trash either. When you have filled your FDIC quota, look at Ally or other local or nationally marketing banks. I have found that for me it is not worth the hassle to have CDs all over, so I settle on one or two or three banks that consistently have good rates, depending on how much I want in CDs. Set up ACAH communication between these banks and your home brokerage and you will have a kind of hub and spokes system which is very easy to manage. Fidelity is very slick with this.

Then when your mind is clear of some of the things pressing on you now, read an investment book, perhaps from the list on this site, settle on an allocation, and buy a few funds to implement that allocation. Then go play.

Ha

 

[dex]

The last ten years should have taught us that "I need to get my money working" is an inept metaphor.
Ha

I think part of the reason is that people have the inflation mind set. If their money isn't 'working' they are loosing some of it to inflation. I don't think that applies currently.

 

[FinanceDude]

FD, do the advisors really spend that much time getting ready for the test?

They need what's called a Series 66 test. I passed mine moons ago and only studied for 2 days. However, I know folks that had to take it 3 times or more.

Most also need what's called a Series 6 test if they want to sell mutual funds and VAs, along with an insurance test through the state they do business in. It is not difficult and no more than a few days of study.

The Series 7 was the real bear. I studied for 4 months and passed, but the pass rate is only about 50% for most folks. Having a finance degree and a concentration in risk management and insurance probably helped me.

I think pretty much sure almost anyone could pass the state insurance test and a Series 6 within a month.

 

[FinanceDude]

I think part of the reason is that people have the inflation mind set. If their money isn't 'working' they are loosing some of it to inflation. I don't think that applies currently.

Even though the govt thinks they are fooling people by saying otherwise, there IS inflation out there. However, inflation at some point will come screaming back. If folks are happy being 100% in CDs and can sleep at night, god bless them. But the banks they invest with should at least send X-mas cards because they are making more that 1-2% on your money......

 

[FinanceDude]

FD, do the advisors really spend that much time getting ready for the test?

Yes, some more. Of course, there are some car salesmen who can't pass their state sales test either, no?

 

[73ss454]

You only have to fog a mirror to get a car sales job.

 

[73ss454]

You may laugh but my DS passed the Series 7 and became a broker. He hated it and stayed in the car business. He's the GM of the #2 Nissan dealer in the country.

 

[Orchidflower]

As my well-informed and bright forum members suggest I am going to do my OWN thing with the help of Vanguard. I switched firms this morning.

Fidelity gave me the heaviest hammer salesman they have in this area I'm sure--who wanted me to buy all these fee-based items--swearing he would help me but everything was fee, fee, fee.

After about 6 hours of work with him (this is counting the 3-1/2 hours in his office when I ended up with a major headache), I just threw up my hands and said, "Vanguard."

I am hoping I get some REAL help from Vanguard and not just some heavy-handed salesperson trying to get their paws on my money. I don't care, because either way I will be doing alot of my own homework and buying for the long-term. In the interim, it sits at Vanguard.

I asked Fidelity I don't know how many times for a CFP, please, and, hopefully, someone with a Masters in Finance but there must not be one in this State. I told them over and over that I have been in sales and am used to driving, so no big deal if I have to go somewhere for the office. Frustrating.

So, to cut to the chase, if anyone here thinks Fidelity doesn't heavy hand you with a sales pitch--especially when they think they have the upper hand because you are a relative newbie--think again.

Maybe I just got The Hammer of the company, but I definitely did not appreciate the technique at all. It verged on insulting, frankly.

By the way, I knew The Hammer would call me before I got home, so I intentionally brought my cell phone. I really wanted to see how far he would allow himself to vent. He again tried to re-sell me on the wonders of Fidelity, ended up saying he would pray for me and hung up on me.....good, I ruined part of his day. I hope that pays him back in the Universe for giving me that monstrous headache Friday.

I kept 3 items I own still at Fido (2 bonds, one fund about to pay off more), but I just will never walk into one of their offices again since this must be the way they treat customers. In short, Fidelity is out for Fidelity in my opinion.

Since I have money there still, I am entitled to use their really great website and read their information. They do have a great website.



P.S. Interesting some of the comments from people who have worked with Fido have had a similar experience of fee-grabbing. I must be in reality.

 

[misanman]

Fidelity gave me the heaviest hammer salesman they have in this area I'm sure--who wanted me to buy all these fee-based items--swearing he would help me but everything was fee, fee, fee.

Wow, what an nightmare. Thank goodness my experience with Fidelity was completely different. I was contacted by the rep that is assigned to me for the first time last week. He just asked a couple of questions about my investing priorities and whether I considered myself a "self-directed" investor. I told him I was and he mentioned that my portfolio seemed to be consistent with my priorities (somewhat creepy that he had reviewed it, but not unexpected). He closed by giving me his direct line phone number and told me to call him if I had questions or if I thought he could help. No high pressure at all.

I'm hoping your experience (and not mine) was the exception to the rule.

 

[audreyh1]

I also have not run into any Fidelity employees like that. I guess bad luck on your part.

Audrey

 

[travelover]

Orchidflower, you did the right thing. I have a brick and mortar Fido shop near me that has been very respectful and helpful, but if they pulled any crap on me, I'd be outta there, too.

 

[FUEGO]

Orchidflower, you did the right thing. I have a brick and mortar Fido shop near me that has been very respectful and helpful, but if they pulled any crap on my, I'd be outta there, too.

From all the people that have used our local Fidelity shop, that is how they say their experience has been as well. No sales pitches, no hard press sales forces, etc. Just in person reps exactly like the ones you talk to on the phone. I wonder if OP's The Hammer was trying to go above and beyond and was heavily commissioned. I think most (all?) of their local staff are non-commissioned based salaried employees. Sure, if you ask for a fee based planner to manage your account for you, I imagine they could give you a sales pitch on that, but I imagine they would back off pretty quickly once you say "not interested in all those fees" a time or two, and give you the "well, here is our free account information and info on our low fees and free services that we offer" sales pitch.

 

[rescueme]

I also have not run into any Fidelity employees like that. I guess bad luck on your part.

Audrey

I would agree; that's not my experience with FIDO (maybe they hired somebody from another firm who is not "on board" with their normal practices).

 

[Bestwifeever]

Orchid, have you looked into Charles Schwab? They also have offices if you want to have face to face discussions, and many people here are happy with them, I believe.

 

[bbbamI]

You only have to fog a mirror to get a car sales job.

I can do that!

...and about Fido, I like 'em. Their reps have given me great customer service. The more you know about investments, the better you can steer them in your direction and reach satisfaction.

At least that's been my experience.