Friend using Edward Jones

[MgoSam]

Hey,

I found out that a good friend of mine is using Edward Jones to invest. She's 30ish, a teacher and has been using them for about a decade. She said she's paying $40 annually, but I didn't press her about commissions (which are 2% of trades, I believe) and that her funds may have higher than necessary fees, should I have? I think she's throwing her money away, but I don't want to just say that. Do you think I should say anything? She's an incredibly close friend of mine.

[NoStacheOhio]

Send her this: http://kronstantinople.blogspot.com/p/edward-jones-saga.html

[ooeei]

You're far better equipped to assess the situation than we are.  Some people would welcome the advice, some would consider it if presented properly, others would consider it an invasion of privacy and you lecturing them.  Which is she?

[ooeei]

Send her this: http://kronstantinople.blogspot.com/p/edward-jones-saga.html

If she's a very curious person who likes reading and is good at separating emotion from business, this MIGHT work.  Then again, she might just skim it and mention it to the broker.  He will brush it off as a conspiracy theory and then tell her how happy he was that this little old lady he's been working with for years finally retired due to all the money he made her since her husband died a few years back, and boom she's in deeper.

[MgoSam]

You're far better equipped to assess the situation than we are.  Some people would welcome the advice, some would consider it if presented properly, others would consider it an invasion of privacy and you lecturing them.  Which is she?

She's someone that is open to new suggestions so long as it isn't completely unsolicited. In addition, she doesn't like not knowing something or feeling ignorant, so I believe that if I just try to walk her through investing she will get slightly defensive. I know one of her best friends who knew squat about investing besides Dave Ramsey and finally asked for advice from me and the entire time she spoke like she was the expert and I the person asking for advice, I ignored it because I knew that she likely was somewhat embarrassed at not knowing what a mutual fund was.

I don't want to embarrass my friend, but I shuddered at seeing that E.J. charges 2% commissions. It's entirely likely that my friend has no clue about that. Her father is someone that works hard but invests his money and doesn't always invest it well and I suspect he insisted on her going to E.J. If I had to guess, I would image that her salesmen is a Rotarian as her parents are heavily involved in their local Rotary and so it may be hard to talk bad about EJ.

My strategy likely will be to explain to her that I am spending around .067% in total fees annually, whereas she's spending 2% + $40 + whatever fees her funds have. Then take a sample figure, say she invests $5500 annually and show her the difference beteween the two over the next 30 years.

[Luck12]

Definitely!  It's a step towards justice.  I don't know your friend so I don't know how you should go about it though.   

[NoStacheOhio]

In addition to 2% trade comissions, $40 annual fee and regular fund expenses, a lot of the funds EJ uses also have 5.75% front loads as well, and a portion of that money goes to EJ as a (legal) kickback from the mutual fund company.

[Huskie87]

I would say, 'I just read about the new DOL regulation online, sounds like a lot of financial advisors are collecting fees that weren't being disclosed to their clients.  Something called a 12b-1 fee.  Does your advisor have those?  I guess they're basically a kickback that the advisor gets for certain types of funds and they can be pretty large.  Sounds like the government is taking the first steps to making these illegal, but not until 2018.'

Maybe this will get her curious and will start a conversation with her advisor about what she's really paying.

[ooeei]

I would say, 'I just read about the new DOL regulation online, sounds like a lot of financial advisors are collecting fees that weren't being disclosed to their clients.  Something called a 12b-1 fee.  Does your advisor have those?  I guess they're basically a kickback that the advisor gets for certain types of funds and they can be pretty large.  Sounds like the government is taking the first steps to making these illegal, but not until 2018.'

Maybe this will get her curious and will start a conversation with her advisor about what she's really paying.

I like this idea. 

Except the last sentence, don't think that's going to go very well.  It'll be lots of misdirection and hand waving if I had to guess, and some of them are pretty good at it. 

[Huskie87]

^for most financial salesman, hand waving is their most valuable skillset

[AZDude]

Also try pumping up your preferred investment strategy rather than more or less calling her an idiot for using Edward Jones. Or even ask about EJ, since you are interested in investing more money, and then while going over the options, you could point out the horrible fees and commissions. Or, since you are good friends, just bluntly say "I think Edward Jones is ripping you off, this is why...".

[prognastat]

If your own returns have been good it might be worth leading her to discover it herself.

You could say hey I have been interested in EJ performance, but that you are worried if it would be worth the work of switching your strategy around. Then give her how you have been performing, your fees etc and ask her how her strategy has been performing and if she thinks switching would be worth it for you.

In the course of trying to help you she very likely might discover she is not getting a good deal and since she feels like she discovered it herself will be much more willing to accept it since she won't feel as stupid since she uncovered it and didn't need to be told.

[MgoSam]

Also I should add that she knows about Mr. Money Mustache. I don't believe she's been to the site much but one of her best friends and roommates is the one that introduced me to it.

I'm kinda hoping that she asks me about my investments, several friends have asked for my advice and opened accounts at Vanguard based on my advice and I've kinda found it best to mention to a few people that I'm paying very low fees. One friend was talking to me about it and recognized that I have Admiral shares and he told it to a few friends that were looking for advice in starting to invest and so that was great as I was able to get them on solid footing (one of them opted for active funds against my advice, but it's her money).

I'll admit that I have mentioned to people that I plan to retire before 40, mostly to get people to ask me how because it isn't difficult what I, and many here, are trying to do: make money, spend less than I earn, and invest the different in low-cost index funds.

I'm hoping that I could slowly hint at Vanguard until she bites.

[MgoSam]

I should also add that my friend is extremely intelligent, but I don't think she has much knowledge about investing and relies on advice from her father, who I suspect is the one that told her to open an E.J. account. She does keep a budget and track her expenses, so she's definitely got that going for her, and is excited that she got hired back for the next year largely because the city has a program for public school teachers to get their student loans paid if teachers work for X number of years and she said that after next year she will qualify.