Edward Jones and my remorse

[MRG]

I noted upthread (but it's a long thread!) that I pay 2% up front on American Funds in the EJ plan. That % tops out at 5.75% if you don't have any other American Funds but I own over $500K in American Funds in other (non-EJ) accounts. I actually like them although I'm gradually moving towards ETFs, which are more tax-efficient, and occasionally individual stocks. I did some research and couldn't find any MO plan that had ETFs so I'm happy with $8,000/year in EJ to get the MO deduction and the remainder in Fidelity.

American Funds sans EDJ isn't the worst place to have money. Their annual fees are around the industry average(~.50) and IMO they really kiss their investors body parts. It wasn't very long ago they had more AUM than Vanguard.

 

[OldShooter]

... I pay 2% up front on American Funds in the EJ plan. ...

Wow. That would be a show-stopper for me.

The salespeople like to wave their arms and talk about the front load being negligible for a long term investor, but the arithmetic says otherwise. If you invest 2% less money, the account will be 2% smaller regardless of how long you hold the fund. Without doing the math I'm pretty sure that paying loads on reinvestment makes it slightly worse.

Example, invest $10,000 and wait until it triples: $30,000. Invest $9800 and it triples: $29400. Still 2% but now in dollars you are down $600. The other problem is that the load fund is almost certainly charging 12b-1 fees along the way, cutting your return and further enriching the salesperson.

 

[SecondCor521]

An update on this- following this discussion I did some research and have decided that form now on I'll put the first $8K into the 529s at EJ to get the maximum tax deduction for my state (Missouri) but anything beyond that is going into the Fidelity accounts I just set up today. The oldest of the 3 grandchildren is about to turn 8 so it's a long enough time horizon that the difference in expenses will make a difference.

Interesting and frustrating how most (not all) of the state-sponsored programs have only high expense ratio funds for investment options.

I am sorry to say this, but my research indicates that EJ may have misled you, @athena53.

There is only one Missouri 529 plan and it is direct-sold, which I'm fairly certain means you would have opened an account directly with them. Here is a link to their site: https://www.missourimost.org/home.html. There is no upfront 2% fee to invest directly. They offer a variety of Vanguard and DFA funds. If you invested in Vanguard's total market offering, the annual fee would be 0.18% (see page 3 https://cdn.unite529.com/jcdn/files/MOD/pdfs/programdescription.pdf)


Fortunately, you can still take a deduction for your contribution if you live in MO and the EJ plan is a qualified 529 plan. See page 15 of the instructions here: https://dor.mo.gov/forms/MO-1040 Instructions_2021.pdf

You may be able to roll over your EJ 529 into a MOST 529 plan, but your 2% up front fee may be gone forever. Switching to the MOST 529 plan would save you the 2% fee on future contributions, though.

 

[OldShooter]

... See page 15 of the instructions here: https://dor.mo.gov/forms/MO-1040 Instructions_2021.pdf ... ...

As I read those instructions, any 529 qualifies.

Page 15: "The state of Missouri allows a subtraction from federal adjusted gross income for the amount of annual contributions made to the Missouri Tuition Program (MOST), or any other qualified 529 plan." That might be worth checking out.

 

[ExFlyBoy5]

Ah, EJ's strikes again. In another thread, I mentioned a neighbor had died in his sleep a few weeks ago. Yesterday, his wife (hard to call her a widow and doesn't like that "title") called and asked if we could try and help her figure out the TV. Long story short, we spent a good 4 hours there and had a pretty good visit.

In the conversation, she brought up the fact that her husband had dealt with the finances and she didn't have too much involvement with where/how their money was (She is in her early 70s and both have been retired for about 10 years) invested. Well, he did a good job making sure everything is "OK" financially and was wise to get out of EJs a number of years ago but she still has some money at EJs that their current FA cannot get fully transferred out.

I don't know the specifics, but the FA told her that they have issues with EJs often and pull these tricks with clients, especially the older ones. She also mentioned her husband would get very angry (and he was one of the most relaxed dudes I have EVER met!) when he had to contact EJs about anything.

 

[athena53]

I am sorry to say this, but my research indicates that EJ may have misled you, @athena53.
<snip>

Fortunately, you can still take a deduction for your contribution if you live in MO and the EJ plan is a qualified 529 plan. See page 15 of the instructions here: https://dor.mo.gov/forms/MO-1040 Instructions_2021.pdf

You may be able to roll over your EJ 529 into a MOST 529 plan, but your 2% up front fee may be gone forever. Switching to the MOST 529 plan would save you the 2% fee on future contributions, though.

Thanks- I wouldn't blame it on EJ. I asked if they offered 529s and they did. So I opened them. Not a bad idea to go with the MOST plan for my future MO-dedctible contributions.