What education/training was required to be a financial advisor at EJ?
There was no specific required education to join EDJ. They were generally looking for people who were self starters, took direction well, and had established success in what they did previously. They were also pretty picky - they were getting about 3000 applications a month and were hiring about 300 of them. Once you were hired you went through a couple of months of at home training to pass the Series 7 and a few others. I studied 12 hours a day, some people studied half that. There were three initial week-long trips to the headquarters for more training, and then periodic training throughout your career. Trips to the headquarters weren't out of the ordinary.
Q: "Why so many funds/individual stocks per account? How much fees do you have to collect to fund your trips to Machu Picchu (or similar)? My parents had one mutual fund with a 2.47% expense ratio. The fund was a popular recommendation for new money."
There was not a set minimum/maximum number of investments in each account. My clients probably averaged 4-6 investments. If they had stocks, that's a bit different. We were trained it was generally a good idea to have no more than 5% in any one stock, so if it was an all-stock portfolio (which was rare) that might yield many different stocks. There were no minimum "fees to collect" to go on Diversification Trips. You had to hit several goals to earn those trips, trying to be holistic about serving the customer. You could generate millions in commissions and not qualify on that alone. And I've love to know the ticker to that mutual fund with a 2.47% expense ratio - the highest I ever saw offered at EDJ was 1.7%, and that was a pretty esoteric one. Most the funds I was offering were under 1%.
Q:"I did see they steal 10% of your dividend reinvestment. And charge you for dollar cost averaging, although I couldn't figure out how much."
I'm not going to answer snarky questions/remarks. If you're thinking I was stealing from clients when I was reinvesting dividends (and suggesting an unheard of rate of 10% commission), this won't be the forum for you.
Q: "I'm not convinced they can do better than a couch potato portfolio, so what can I get for my (now yours!) $30,000? 1st Q: Can they do a deep dive analysis into when to take SS, if/when/how much for Roth Conversions? 2nd Q (dependent on answer to Q#1): If so, great. I won't need that updated every year, so now what?"
I assure you many portfolios "did better" than indexes or pre-set portfolios, but I'd never promise that. And I know you believe that's impossible and therefore I won't waste our time trying to show you. You'd also want to define "did better" - the vast majority of clients were more concerned with a smooth ride versus total return. It would be pretty rare that anyone was paying 1% on a $3m portfolio. In a managed account, that number would likely be closer to .7% or so. We often did the deep dives into SS, Roth conversions, and overall financial planning. That was where the fun was - and where we earned our money. We were told during training "Making the sale is when you make the money. The next 10-20 years is when you're going to earn it." We often DID update those plans, because it was our responsibility to make sure we knew what was going on in the client's life. Are they moving? Having kids? Retiring? Getting sick/old? Promotion? People's needs changed (as did laws and investments), and we had to make sure their plan still worked.
Q: "Has anything changed since you left TEN years ago?
Probably. I know the initial prospecting program has changed (perhaps due to Covid) but I'm not sure exactly how. There's also more of an emphasis on managed accounts, something EDJ resisted for a long time and only started offering shortly before I left. Unfortunately (in my opinion) clients much prefer to pay a smaller ongoing fee (say, 1%) in a managed account instead of paying a larger one time fee (say, 3.5-5.75%) to buy A-Share mutual funds. I think due to that, and the regulations that at one point were supposed to ban A shares in IRAs, there was a move to managed accounts. I don't see anything changing in their core philosophy.
Q: "What is the reason EJ refuses to close an account, when over four years ago I directed them in writing to do so after transferring all of late DW's funds to Vanguard? Currently account shows $2.38 balance."
If the account holder asks the advisor to make a change (especially a transaction), there's no option - they have to do it. I have no idea regarding your situation specifics, but I'd guess the client "in charge of the account" hasn't asked for them to close the account. If that's you, it should be a pretty simple transaction. Call them.
Q: How can we validate that what you say is actually true today for an EJ investor?
That's easy, you can't. I can't tell you personally what it's like to be an advisor with Edward Jones today, only my experience then and what I've gathered since then from talking with the advisors that are still there.
Q: " How did you get compensated at EJ? What was the plan? Why do they call you Financial Advisors instead of sales people?"
We were generally paid commission on transactions, and also were paid based on a 12b1 fee of about .25% for A-share mutual funds (the majority of my business). We would generally get 40% of most commissions, so for example: The first $10k into an A share mutual fund would yield about $575. We'd get 40% of that ($230), and after the first year get 40% of the .25% 12b1 fee (.1% or about $10) every year. For the person who just started investing and gave us $1000, it would be $23 up front and $1(!) a year. While I know some more experienced advisors would refer smaller prospective clients to other advisors, I loved dealing with them. Anyone who's just starting to invest was very exciting to me! Just as there's many different kinds of fees and commissions, there were lots of variations of these fees/commissions. But it was the most common. As for why we weren't called sales people: While we were definitely sales people in order to make the initial sale (and were told directly "This is a sales job"), we earned that money by advising over time. Many clients would roll a 401k to me, I'd get paid a healthy amount up front, and then make very little going forward. That vast majority of time and interactions I'd have with clients yielded no earnings, but were necessary to serve the client.
Q: "Didn't you have an NDA at EJ? Doesn't it cover you doing an AMA on the internet?"
I don't remember signing an NDA. I thought a lot about doing this though, and came to the conclusion that I don't think I'll be telling you all anything that I wouldn't have told a client. Edward Jones was brutally honest with their clients. In addition to verbally reviewing fees and expenses with clients, it was made clear: You point to the number, look them in the eye, and say "This is how much this is." Much of what I've said so far, I've told to clients. I never once was told "never tell a client this, but...". Not once. And if I can tell them, I can tell you.
Q: "For the average EJ Financial advisor, what % of his/her time is spent on acquiring new clients, and retaining current ones, versus time spent on actually analyzing their finances? how do you get customers? That is estimated to take most of the time, and then, armed with this info, they don't need you after a year or two, so you are always hunting for new clients.
In the beginning, it was 100% acquisition. Most advisors are not given any clients to start (although some are). That involves picking a neighborhood, going door to door and just introducing yourself. Our goal was to gather contact information (or make contact with someone we already did this with) 25 times a day. About three an hour. This was GRUELING, and was described by Jones as "highly inefficient, but highly effective". Our job was to build relationships, and doing it face to face was the best way. I never once called someone I didn't know, unless they were referred by another person. As time goes on, and you build your client base, your time naturally veers into more serving the existing clients and less hunting for new ones. As for not needing me after a year or two, that sounds nice but wasn't what I saw. I'd check in with my clients every 2 weeks to 3 months (however often they wanted to hear from me), and more often than not at least once a year there would be something that needed my attention/effort. Eventually (I was told) the majority of the business would be clients calling me to take care of things. I started to see that happen before I left. And I'm told when the markets tank, all the clients need a lot more attention. I never found this to be the case, probably because I drilled into their heads "Your account is going to lose value. That's part of the plan." and stayed with pretty conservative investments.
Q: "Were you ever encouraged to churn accounts of do anything else to increase fees? Did you sell mutual funds with upfront fees (loads)? How were you able to sleep at night during those 6 years?"
Churning or making unnecessary extra commissions? Never. Never ever ever. Do what's right for the client was the manta burned into our heads. "Would you do this with your mother" was said many, many times. If our Field Supervision Director (technically our boss) ever had even a -whiff- of that, we'd be getting a call demanding an explanation. I remember several completely proper transactions that made EDJ money that I had to justify to them on those calls. If anything seemed like it wasn't in the clients best interest, red flags would pop up. I was (and still am) a big fan of good mutual funds sold as A-shares. When a client wants a long term investment, and plans to hold it for a meaningful period of time and wants professional advice to go along with it, I think it's the best option.
How did I sleep? Pretty well after the initial gut-wrenching stress of the first couple of years. Turnover is famously high, and that was always a weight on our backs in the beginning. It was actually pretty hard to leave - I had built up some great relationships, the clients (well, most of them anyway) truly seemed to love me, and I absolutely loved (most of) them. I remember my wife making about fifty little butter cakes and then spending a day shortly before Christmas driving around and hand delivering them to my "favorites".
If anyone wants any followup discussion, feel free to PM me. I can see how this could spin out of control for content and I would rather this thread be informative vs an infinite back and forth.
