Author Topic: My parents want me to attend a meeting with their Edward Jones rep. Advice?  (Read 5834 times)

davisgang90

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I've been talking to my parents for years about moving money out of EJ and into indexed investing.

I'm visiting them next week and my dad just emailed me that he'd like me to come to a meeting with the EJ rep and discuss my recommendations.  How do I do this without telling the EJ guy my parents should drop him like a hot rock?

I don't have a great deal of visibility into my parents' investments other than the fact that they invest through EJ.

My dad CC'd his EJ rep on the email and said I could reach out to him for any prep materials ahead of time, here is what I sent to the rep:

"Look forward to meeting you.  Can you give me a rough outline of the types of investments you are currently recommending and how my parents' money is currently invested?  I'm an index fund style "set it and forget it" investor, so that is the primary recommendation I've made in the past to my folks. 

I'd be especially curious about the various fees of the investment vehicles above and how EJ structures fees for its reps."

I'd like any advice for someone who has either helped their parents with an Edward Jones style investment company or has left a full service rep in the past.  I don't want to be a jerk, but would like to get my folks to stop paying more fees than necessary.

Thanks!

Spork

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I am not sure I have any good advice.  If your mom/dad like and trust this guy, they're very likely going to trust him as the expert.  Good luck.

I tried for years to get my dad to see how much he was paying for Merrill Lynch.  But that guy was a really nice guy and the balance generally went up over time.  When he passed away, his stash was significant -- but not nearly as significant as it should have been.  He was a high earner and worked well into his mid 80s.  His net worth when he died was about double mine when I retired at 51.  It should have been 10x or more.  But he always had more than enough and was happy with it.

daverobev

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I love this quote:

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”
― Upton Sinclair, I, Candidate for Governor: And How I Got Licked

The EJ person will/can not understand. YOU have to understand that going in. They 'honestly believe' they are adding value. Of course you should not be rude, but the simple fact is, your parents are paying for this person's life - their mortgage, their suits, their car loans. They will not want your parents to leave, and will say anything they can to keep them. But the simple mathematical fact is that that person is adding significant drag to the portfolio.

If you can, you need to get your parents out. Do a compound interest calculator showing what a 2% MER does to returns over time. There's no argument other than maths.

Heroes821

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Its interesting to me that I see on here a lot about getting parents out of these brokerage firms, and I definitely agree with the principle.

BUT I personally have recommended to my mother that she needs to find someone like an EJ rep to talk to because she has zero desire to handle her own investments and as an Ohio teacher the one person she spoke to (a rep of the company that manages the teacher pensions) told her it was impossible to retire earlier than whatever time he told her, a good 5 or more years longer than my mom wants to work.

Even with the fees, I think the older generation is usually more interested in having a professional they can interface with than managing their own things regardless of the fee.

So getting back to the OP, you might want to see exactly why your parents want you there to begin with.

Vagabond76

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If it was me, I would simply decline to go to the meeting.  I want nothing to do with Edward Jones (or any other full service broker).  That is what I would tell my parents, and they can interpret it however they wish.

Mighty-Dollar

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I'd like any advice for someone who has either helped their parents with an Edward Jones style investment company or has left a full service rep in the past.  I don't want to be a jerk, but would like to get my folks to stop paying more fees than necessary.
Edward Jones are commission-based "advisors"! In other words they are nothing more than salesmen in search of transactions! You need to educate your parents on the difference between a fee-only advisor and a commission-based advisor. When you go to a commission-based advisor it will be the most expensive free advice you will ever get.
There is no point in meeting with EJ. EJ is going to reject your advice to invest in index funds. They will try to argue that they can pick winning actively managed mutual funds, which is nonsense.

“If your advisor thinks he can pick winning stocks, choose winning actively managed mutual funds, or time the market -- steer clear!” -- Whitecoat Investor

"In study after study, year after year, it has been shown that the vast majority of actively managed mutual funds underperformed their benchmarks" -- Jim Cramer


Mighty-Dollar

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Quote
she has zero desire to handle her own investments

Even with the fees, I think the older generation is usually more interested in having a professional they can interface with than managing their own things regardless of the fee.
That doesn't make sense. What is so difficult about investing in buy/hold/rebalance index funds? A 3rd grader can do it. There is no "managing" other than doing percentage rebalancing if and when the allocation ratio gets out of whack.
I'll bet you that she thinks that an advisor is supposed to pick winning funds or pick individual bonds and stocks, and time the market. An advisor should do NONE OF THIS!

GreatLaker

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I moved away from a full service broker / "adviser" that I had been with for 20+ years. I moved accounts away in 2 phases, non-registered first, followed by registered a year later. Both moves were preceded by discussions with the adviser about service level, advice, performance and cost. Both times I had comparisons of the adviser's performance vs the comparable index. I was able to get small concessions on cost, but not nearly enough to keep me. In both cases I already had a plan for what I do at my new discount broker with ETFs. The adviser's response was typical self-serving platitudes about cost vs. performance, risk, necessity for active management to succeed, avoiding downside risk etc. All easy to see through for an educated investor. Glad I did it; no regrets at all.

How much does your father understand about the impact of cost? How receptive is he to changing? I would ask him the purpose of the meeting, why he wants you there and have a heart to heart talk about why you feel he should change away from EJ. Here are a couple of links about the impact of cost and the futility of active management you could give to your father. The first is longer but may be more effective since John Bogle talks in a more folksy manner, compared to William Sharpe's academic Nobel prize winning style.

In Investing, You Get What You Don't Pay For https://www.vanguard.com/bogle_site/sp20050202.htm
The Arithmetic of Active Management https://web.stanford.edu/~wfsharpe/art/active/active.htm

Consider the impact of a 1% fee on a $100k portfolio, through a typical investor's lifecycle of 50 years, age 30 to 80. 1% of $100k is $1000, or $50k over 50 years. Fully half of the initial portfolio gets paid for advisory fees. Indexed investing keeps most of that money compounding in the portfolio.

People find changing intimidating, especially if they feel they are being pushed into it, or might feel embarrassed or loss of face over their previous position. Consider framing it in terms that investing has changed, indexing has really proven itself in the last 10 years, discount brokers or Vanguard are well known and trustworthy, and a decade ago it would have been much harder to do this, but now is a great time to do it. "I know you like the EJ guy but he is a horse and buggy in a self driving car world" or some other analogy he could relate to. That makes it easier to leave the past behind.

As far as the EJ guy, you have no sway over him at all; it's your father's account. Use it as an opportunity to learn how he operates, fees, comp, costs, DSC charges, etc. Give him an opportunity to offer something better. Tell him what you believe, but don't impugn him or his reputation. Don't make it confrontational, since if your father stays with him it will make things difficult.

Good luck, but getting low fees from EJ will be like asking for a discount from a full service gas station if you pump your own... they just are not in that business.

Frankies Girl

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My MIL has all her accounts with "The Edward Jones" and there's nothing we bother to do about it at this point. We're children and no matter how old we get, how educated or successful... we're still children. And her EJ rep has always been so nice and helpful.

The inlaws have always been taken advantage of because they believe that anyone they give their money to will be for some reason someone they can trust if they are polite. They have fallen for scams, bad deals, outright crooks... but still follow that premise.

I also would decline that meeting mostly because you'll probably just want to lean across and slap the guy/gal after a while. They'll be really expert at talking around any point you'd make and you'll still be an amateur up against a pro that depends on being able to convince people that what they are pushing is a good thing... so unless you have great confidence in your ability to see the BS, catch them out in any fuzzy math and able to convince your parents as well, I'd just not bother.

I would tell your parents that Edward Jones has a horrible reputation in the financial services field for charging high fees, and part of the main business practices are to ingratiate themselves into their clients' lives to make them think they really care about them and their family. It's a business ploy - they really don't like calling all their clients up and talking about how the kids or grand kids are doing, how's that home improvement project going... it's slimy and sad and I think it takes advantage of the elderly in the worst possible way because many of them are a bit lonely and enjoy talking and interacting with people.

They are sales reps, only out to ensure their commissions and their company's fees, and the making decisions based on that first and second. They would not do something outright illegal, but nothing they can do for them would be in their best interests first and foremost. If it was, they'd be directing all of their clients to low/no fee index funds and charge them only operating costs... like Vanguard.

You should watch the Frontline special "The Retirement Gamble" by yourself, and then with your parents. It explains how fees eat away at your portfolio and Edward Jones is one of the worst for that crap. It may not mention EJ's policies specifically, but it should show them that fee structures are very, very important to pay attention to.

http://www.pbs.org/wgbh/frontline/film/retirement-gamble/


ETA: just remembered when I was thinking of leaving UBS due to a pushy "friendly guy" salesman. My dad had an IRA with him, around $50K that I inherited. Guy decided to start asking me within a week of my dad's death (WTF) about other accounts I received and that he highly recommended transferring them to him to manage as he was guaranteeing he could do great things for me. I kept telling him I had no plans of moving anything for a while to deal with the death and such and would change the subject/get off the phone ASAP.

When I finally got caught up on investing and started moving to self managed I had no pushback from my main set of accounts. My Fido rep was actually very supportive of index investing and told me it sounded like I'd done a great job of figuring things out. The UBS guy? He told me he could never recommend anyone self managing as there was so many details and issues involved and it would be like him being a doctor and having a patient telling him that they were thinking of performing an operation on themselves... he was very condescending and that was it for me.  I told him goodbye and got the paperwork started to move the account that day. Once it was completed and the account closed, I did call the UBS corporate and let them know that the hard sell/pushy salesman crap he'd been doing - starting right after my father's death - and they of course were so sorry... suuuure.

I'm sure that condescending "I'm an expert, honey, you're too dumb to do what I do" attitude is quite prevalent. Some may hide it better than this guy I had, but I'll lay even odds that the EJ dude/gal might pull that same thing with you and do the whole "silly little davisgang90, huh?" type of crap to your parents and how naive and short-sighted you're being since REAL financial advisers are mystical mages that go to school for a billion years and uphold the noble and forthright path and you're just a dimwit that has a tiny bit of knowledge that doesn't really apply in your parents' case and how it will do them more harm than good to listen to you.

« Last Edit: November 04, 2016, 06:47:33 PM by Frankies Girl »


MustacheAndaHalf

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #10 on: November 04, 2016, 08:09:03 PM »
"I don't have a great deal of visibility into my parents' investments other than the fact that they invest through EJ."

If they aren't trying to make you familiar with their finances, then it sounds like an intervention that their EJ rep initiated.  At best you can bring printouts with Vanguard, Fidelity and Schwab expense ratios.  For example, something showing that Vanguard Total Stock eats up 0.05% per year... Schwab US Broad Market 0.03% per year... iShares Total Stock 0.03% per year.  And then you emphasize these funds hold almost all publicly traded stocks in the US market.  So anything EJ offers has to pick from those stocks - do they charge 0.05% in expense ratio? 

You need to put the EJ rep into a situation where they get evasive, where you have printed proof.  You're not there to get the EJ rep's take on the world, you're there to look like you know things the EJ rep does not.  Your audience is your parents.  Take the opportunity to show them they are not being told everything.

I would also take the chance to bring up the fiduciary rule goes into effect next year, and that EJ owes a fiduciary duty to your parents.  For this comment, the audience is your parent's EJ rep.

Hm, actually the best piece of evidence you could bring is probably the "SPIVA scorecard".  It shows how most funds cannot beat the S&P 500.  And the EJ rep probably won't have heard of it, and probably can't make the connection that S&P puts out this scorecard.  Since S&P 500 is a benchmark used everywhere, the rep and your parents know about that.  So when the rep questions the reputation of SPIVA, you point out that "oh, you don't trust the people who construct the S&P 500 benchmark?"   It's worthwhile bringing up how little the EJ rep can add in value, compared to following the S&P 500 index (at Vanguard, Fidelity, Schwab... just not Edward Jones).

Moat likely, though, you'll be swayed into thinking the EJ rep is a friendly nice person (rude salespeople don't keep clients) who knows more than your parents.  They just don't see how much this friend costs them, compared to alternatives.  Hopefully you can illustrate that, or at least show that the EJ rep has gaps in their knowledge - and that the competition can save your parents money.

Indexer

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #11 on: November 04, 2016, 08:31:36 PM »
Go in with good questions.

1. What are your fees?
1b: if it sounds super complicated ask why it is so complicated and have him actually spell it out for you. If there are loaded mutual funds(A shares, C shares) make him explain the load, the 12b-1 fees, and the expense ratio. If they have a managed account, ask about the AUM fee, AND the underlying expense ratios, and ask the advisor to add those together. Make them put it into an annual number, and then try to relate that to something in real life. 5-10k= oh that's a really nice vacation my parents could be taking each year.
1c: if he tries to say A shares are cheaper if you hold onto them longer ask how long your parents have been in their different A shares. Anything under 5 years and the A shares normally end up being even more expensive than the C shares(which is really bad). Again, all of them are more expensive than Vanguard index funds. If he is trading A shares on a regular basis(every year or so) to generate more and more commissions this is called churning and can get an advisor in a lot of trouble with FINRA.

2. How do you justify that you are improving my parents returns by more than that fee?
2b: if he had a hard time explaining the fee to begin with ask him to explain how he can be so sure he is adding value when he wasn't sure what the fee was.

3. Are you a CFP? Why not? Most high net worth investors will only work with a CFP because they see anyone else as being unqualified. If he says he has a series 7, answer so do the phone reps at the 1-800 numbers for Fidelity and Vanguard... What makes you more qualified than them?

4. why aren't you using low cost index funds like many fee-only fiduciary CFPs recommend?  Your ammo: over time index funds normally outperform active funds thanks to lower costs, less turnover(which helps tax efficiency). I've heard a counter argument lately where some brokers will try to explain that index outperformance is thanks to the Feds easy monetary policy. Or they will say index funds don't provide downside protection. Nip that in the bud. Index funds as a group outperformed active funds as a group going back decades, they just became more popular after 2008 because active stock funds fell just like stock index funds AND you can build a conservative portfolio of index funds by mixing stock and bond index funds. Active doesn't provide anymore downside protection than a similar index portfolio would provide. ACTUALLY, the active portfolio is likely less diversified so you could argue it is actually riskier.

5. If there are individual stocks in the portfolio. Great question for the advisor, "Fund managers get paid millions and they have armies of analysts helping them pick the best stocks. They still have a hard time beating the market. What expertise did you employ when you picked these individual stocks, and why do you believe this strategy will work better than those mutual fund managers' strategies?"
5b. Isn't investing in an individual company far riskier than investing in a diversified mutual fund? Would you consider my parents to be risky investors?

6. Are you a fiduciary? What conflicts of interest are present in this relationship?


If you get to actually see the portfolio:
1. look for A, B, and C shares. Those are EXPENSIVE. Within those American funds are on the low end(cost) and Oppenhiemer/Putnam are on the high end.
2. look for funds of several different companies where the combined for each company is under a certain threshold, lets say 100k. If you see 90k of American funds, 90k of Franklin, 90k of Oppenhiemer, etc. then the advisor is avoiding breakpoints so HE can get even bigger commissions. This is lawsuit worthy. Most commission based fund companies give discounts if you invest a certain amount in their funds and this number can combine several funds. If you invest over 100k with American funds your fee as a % goes down, again normally around 250k or 500k, and again at 1 million. If an advisor purposely spreads the money across fund companies to avoid these discounts you have grounds to report them to FINRA. Keep in mind you want to look at what was invested, maybe not the same amount they have today.
3. tax efficiency. Edward Jones is terrible about missing this. If you see stocks in the IRA and bonds in the taxable, why didn't they just switch the two to make the account more tax efficient? 



Oh, and PS, I worked at EJ in the past. Their brokers were paid commissions. Sell an A share, EJ gets a cut, FA gets a cut. In addition, their FAs, my peers at the time, were clueless. They didn't understand tax efficiency in the slightest. Most people struggled with understanding how a back door Roth worked... and in many cases made the wrong recommendation anyway. Seriously, most of them have a Series 7 license, it's not easy, but it's not hard either. It is what you need to do 'trades,' so anyone at Vanguard/Fidelity/Schwab/etc. who can take a brokerage order over the phone has a Series 7. The EJ advisors would just follow the EJ advice. Knock on doors,  sell A shares, and EJ would tell them they were helping people. I left when I realized I wouldn't buy the investments we were selling with my own money or recommend them to family/friends... I wasn't there very long.

steveo

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #12 on: November 05, 2016, 03:03:14 AM »
At least your dad is inviting you. My parents use a financial advisor. I've explained to them how stupid it is. Mum says stuff like "we have a really diversified portfolio" and "we tried another company and they couldn't beat it" and "our friends haven't done as well as us". My dad tells me with a smile that they have bought them some vanguard funds.

Dad just can't be bothered fixing it. I think mum honestly likes telling people they have a financial advisor.

Op - I would honestly go in and just state clear questions and explain the facts as you see it. Just basically tell them that based on fees that can't beat a low cost indexing approach over time. Just state it's not your idea. You got the idea from Warren Buffet and Jack Bogle.

davisgang90

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #13 on: November 05, 2016, 03:13:45 AM »
I knew I'd get great, concrete advice from this group and you did not disappoint.  Thanks for the great ideas and links.  Off to study.

former player

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #14 on: November 05, 2016, 03:41:42 AM »
It's not that long ago that it was impossible to buy low-cost index funds directly from the funds or through an on-line platform and there was little to no advice about self-investing.  It's actually not that long ago that there was no internet.  OP's parents probably started investing under completely different conditions where 1) they were at least investing, 2) they chose from the options available to people who had no knowledge of investing and little to no way of reliably obtaining that knowledge 3) they've stuck with what they know and what they think has worked for them 4) at this stage in their lives they are unlikely to want to learn to invest online for themselves.

As to the meeting with the Edward Jones guy, I bet it was his suggestion and he is looking to expand his client base into the younger generation.  He won't be thinking of the possibility of losing his current clients.  OP's parents won't be thinking of making a change, won't want to embarrass their "friend" and are unlikely to want to cut off someone they probably think has been doing a good job for them.  They may not want to even acknowledge that there is a problem.

So although I think lots of good financial advice has been given in this thread, I'm a bit worried about the lack of good psychological advice.  Having now committed to this meeting, I think OP needs to work out his hierarchy of desirable outcomes and tailor what he says at the meeting to those outcomes.  I would suggest -

1.  Maintain a good relationship with his parents.  That very likely means not being seen to embarrass or attack or have an argument with their "friend".
2.  Not ask about his parent's investments.  That is none of his business.  If he wants to know, he can ask his parents in private and his parents can tell him or not as they wish.
3.  Ask questions about what the EJ guy is offering, what his returns were last year and what the costs were.  By all means disclose the returns on his own index funds last year and the costs being paid on them as a comparison to the EJ guy's suggestions.
4.  Politely turn down the opportunity to invest through EJ.
5.  The end.

KBecks

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #15 on: November 05, 2016, 06:41:00 AM »
I agree to be polite and try to keep the meeting short.  Of course, stay close to your family, don't let this get between you in any way.   If they are selling you, you say thanks for the info.   If you are luring your parents away, then keep it polite.  Boomers generally want relationships and value and trust relationships, whereas younger investors don't trust pepole and prefer technology. 

Keep the meeting short and polite.  It's very likely that your parents will stick to their advisor and you'll do things your way and that is OK!


FIREby35

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #16 on: November 05, 2016, 08:02:59 AM »
BTW, count me in the camp of asking all the questions you know the advisor doesn't want to answer (Fees, Fiduciary, trading patterns). Depending on your relationship with your father, I would go a step further and say, "Dad, these are some of the questions I'm going to ask. Here are the answers some financial advisers give. Let's her what your guy says"  I'd ask the questions, fully aware the EJ guy is not going to give the "right answer" and then follow up with something along the lines of, "Is that the consensus opinion in the financial field?" or "What is the opposing point of view." I'd try to get him to at least acknowledge the "right" answer. Then your parents would know it's not just you but a general dispute in the financial industry recognized by the "experts." Bonus points if you can reveal their "expert"  is a greedy liar who witheld opposing viewpoints to protect his own financial interest - which is exactly the meeting you are walking into.

I will say I'm a trial attorney for a living. So, I'd ask the questions, twist them up and make it obvious they were full of shit for my parents. And I'd do it with a big smile and very politely.

Kl285528

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #17 on: November 05, 2016, 08:25:18 AM »
A few thoughts:
Use this as an opportunity to learn what investments your parents do have. My folks were fairly open with me about it, but now that I'm dealing with my elderly in laws and their secretive ways, my wife and I are still discovering accounts and investments.
Secondly, don't discount too much the fact that anyone that gets people to save and invest is potentially better for your parents than if they were left to their own, where they may not have saved and invested anything. DIY works fine only if you have the interest and resolve to do it.
Finally, I would do more listening than hard core cross examination of the EJ rep. Then, after the meeting, show your folks some Bogle and MMM, and see if you can make progress. Persuasion  can take time, just like conversion to MMM principles usually doesn't happen overnight. Your patience may well yield more results than being heavy handed and overly insistent on the logic of your approach.

BTDretire

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #18 on: November 05, 2016, 08:44:10 AM »
It would be ideal if you could see how much money the had in Jan 1, 2010 and how much in Dec 31, 2015.  See how the increase is different vs VTSAX. If they have bonds, pick one of Vanguards bond funds and use their ratio.
 You could also check and see how much churning of their portfolio he has done.
  See if you can figure out how much money has actually been paid in fees to the brokerage vs what a Vanguard fee would have been.
 Good Luck.
Your problem will be, if they change and the the markets go down 20%, they will see
losses and the will only see that Vanguard lost money not that EJ would have lost money.

COEE

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #19 on: November 05, 2016, 04:50:35 PM »
You have 'pampered butt syndrome'.  You won't convince your father because he pampered your butt.  Just smile when he leaves you your inheritance and be thankful that he had anything to leave.

I wouldn't meet with the EJ guy if he was the last used stock market cronie on the planet.  The guy is literally trained to separate you from your money.  He knows everything there is about index funds and how he will never beat them over the long haul.  However, he has been trained to have all of the 'answers' to try to convince you that his methods are better, your dad will agree with the EJ blowhard, and your father will think you're stupid for not listening to the EJ blowhard's advise, further validating the papered butt syndrome in his mind.  There is no way you'll beat this guy in a 1 on 1 - even if you are right.  At least not in the eyes of your father.

You've planted the seed - the best way to help your parents at this point is to keep your damn mouth shut.

Metric Mouse

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #20 on: November 07, 2016, 12:41:10 AM »
It's not that long ago that it was impossible to buy low-cost index funds directly from the funds or through an on-line platform and there was little to no advice about self-investing.  It's actually not that long ago that there was no internet.  OP's parents probably started investing under completely different conditions where 1) they were at least investing, 2) they chose from the options available to people who had no knowledge of investing and little to no way of reliably obtaining that knowledge 3) they've stuck with what they know and what they think has worked for them 4) at this stage in their lives they are unlikely to want to learn to invest online for themselves.

As to the meeting with the Edward Jones guy, I bet it was his suggestion and he is looking to expand his client base into the younger generation.  He won't be thinking of the possibility of losing his current clients.  OP's parents won't be thinking of making a change, won't want to embarrass their "friend" and are unlikely to want to cut off someone they probably think has been doing a good job for them.  They may not want to even acknowledge that there is a problem.

So although I think lots of good financial advice has been given in this thread, I'm a bit worried about the lack of good psychological advice.  Having now committed to this meeting, I think OP needs to work out his hierarchy of desirable outcomes and tailor what he says at the meeting to those outcomes.  I would suggest -

1.  Maintain a good relationship with his parents.  That very likely means not being seen to embarrass or attack or have an argument with their "friend".
2.  Not ask about his parent's investments.  That is none of his business.  If he wants to know, he can ask his parents in private and his parents can tell him or not as they wish.
3.  Ask questions about what the EJ guy is offering, what his returns were last year and what the costs were.  By all means disclose the returns on his own index funds last year and the costs being paid on them as a comparison to the EJ guy's suggestions.
4.  Politely turn down the opportunity to invest through EJ.
5.  The end.

Great advice.  This, along with the expense ratios of low-cost index funds (which I would not point out at the meeting, but perhaps later in private) would be a great way to handle the meeting.

FIREby35

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #21 on: November 07, 2016, 06:26:26 AM »
I'm not saying you all are wrong, but I would still ask all the questions. The "cross-examination" does not have to be confrontational. In fact, it is soooo much better if it "kills him with kindness."

OP can very politely ask, "What are the expense ratios?," "Is that industry standard." "Is there anywhere less expensive." "Oh, no - what about Vanguard, I keep hearing about them." Hmm. "What kind of front end loads do you have?" "What happens to that money?" "Why should I choose an investment with a front-end load." "How does that affect my overall return." "Can you tell my why active management is better than indexing?" "So, where did you get your financial advisor credentials." "Can you explain what a fiduciary is? I read on the internet I should ask that but I don't exactly understand what it is." "So, are you a fiduciary?"

Gee whiz, thanks for the info. I guess I'll think about it.

It really won't take much to reveal the underlying scheme here. It's also not about getting his parents to change at that moment. They can watch someone try to sell OP something he doesn't need and, possibly, plant the seed that a) he asked really good questions and b) did they know the answer to those questions and c) maybe they should learn the answers to those questions.


Heroes821

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #22 on: November 07, 2016, 06:43:32 AM »
Quote
she has zero desire to handle her own investments

Even with the fees, I think the older generation is usually more interested in having a professional they can interface with than managing their own things regardless of the fee.
That doesn't make sense. What is so difficult about investing in buy/hold/rebalance index funds? A 3rd grader can do it. There is no "managing" other than doing percentage rebalancing if and when the allocation ratio gets out of whack.
I'll bet you that she thinks that an advisor is supposed to pick winning funds or pick individual bonds and stocks, and time the market. An advisor should do NONE OF THIS!

Not to derail the OP, but since you quoted me. She hates computers, similar to a third grader throwing a tantrum. She complains that everything is way too complicated to use.  I can give her advice and help her as much as I can but I will always hit the wall of "you don't do this for a living" "you're not an expert" or w/e. All in a loving kind tone.  She would end up working the extra 5 years rather than plan out her retirement herself, hence why I push her to meet with someone anyone that does financials professionally.  She will get SS and her pension and she doesn't know if that is enough money, so I've asked her to budget and find her annual expenses.  She's good at saving her money though, she paid off her house in less than 10 years.

ooeei

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #23 on: November 07, 2016, 07:43:58 AM »
That doesn't make sense. What is so difficult about investing in buy/hold/rebalance index funds? A 3rd grader can do it. There is no "managing" other than doing percentage rebalancing if and when the allocation ratio gets out of whack.
I'll bet you that she thinks that an advisor is supposed to pick winning funds or pick individual bonds and stocks, and time the market. An advisor should do NONE OF THIS!

Doing it isn't the hard part.  The hard part is knowing what to do.  You understand that's the best strategy because you understand the math behind it, and the history.  You also know why not to panic when the market drops, and how to react to any number of other situations.

The average person just hears you talking about index funds the same way they hear professional advisors talking about active funds, or commodities, or any number of complicated things.  There are literally thousands of different opinions on how to invest out there, what would make them trust yours?  If your answer is "well the numbers and statistics and history" then you've already lost the battle, because if they understood those things they'd already be invested in the same funds as you.

There's a non-negligible group of people out there who want a good rep to deal with who's friendly and personable, and comes across as being smart and honest.  They find an "expert" and trust them to do the job right.  There are people out there who pay plumbers to unclog a toilet, or electricians to replace a capacitor in a ceiling fan. 

Is replacing a light switch hard?  Not if you know how to do it.  There's a certain understanding of electricity that makes it way safer and easier, even if it doesn't add any effort, that can be taken for granted by people who understand it.  A lot of people see any sort of wires like they see a rattlesnake, something totally unpredictable that can kill them instantly.  You can start trying to explain electricity to them, but many of them don't give a shit and will stop you halfway through and say "I don't want to learn all that, I'll just pay someone."  That's replacing a light switch, which doesn't have 1000's of different interpretations and efficiencies and 10+ year timeframes.  Plenty of people I've talked to nearly pass out from boredom if you start talking about math or investments at all.
« Last Edit: November 07, 2016, 07:46:37 AM by ooeei »

ooeei

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #24 on: November 07, 2016, 08:03:07 AM »
OP, just be aware he's a professional at this, and it's entirely possible he'll out sell you.  He's a salesman, and literally convinces people of this stuff as a job.  Unless both you and your parents are pretty sharp, it's going to be very tough.

What often happens is he'll get you into an argument he knows he'll win.  The ASSUMPTIONS at the beginning of the argument are the real sticking points, and he'll win the argument if you let him have the right assumptions.  He may be able to do this without you knowing if he's skilled enough, to the point where 5 minutes into the discussion you realize he's right, then go "but wait, you said blah blah blah at the beginning, that's the part I disagree with." That's going to make you look like a sore loser who's grasping at anything he can to win, even if you're right.  Maybe it's something he didn't even explicitly say, but it's assumed anyway.  Assumptions could be that their funds will outperform the S&P, that your parents will underperform it, or numerous other things I can't think of.  He might acknowledge you're right about some assumption being off, but suggest running the numbers anyway and fudge the math a bit to "make up for" the assumption being off.  You know, a compromise.  Except you're still playing in his court, and he's still in control.  If you refuse to play, he wins by default.

Be cautious using the benchmark, as there's a chance their funds have beat it during some years.  He may also show performance graphs that neglect to include fees, or may be just made up (or structured in such a way to appear better than they are).  The assumption in this case being that his graphs and math are correct and comparable to your graphs and math.  For example, most S&P500 graphs don't include dividends, that gives you a disadvantage approximately equal to the fees he charges.  He may also have front loads on the funds taken out before the graphs start, so that 5% front load is missing from the graph.  There may be fees for moving around and rebalancing funds that aren't included. 

You have to stop him when you disagree with the assumptions.  This may mean stopping 2 minutes into the meeting, which is not going to give you enough time to convince your parents. 

For example:

"I think your graphs are wrong" might not necessarily be true because they're just different from yours and he can defend against it. "I think your graphs aren't comparable to mine because they don't include ____ and _____" isn't convincing since maybe your graphs are the shitty ones, and he has really slick explanations for why those aren't included.  You also have no way to prove your claim if you think his graphs are wrong.  Maybe you refuse to even discuss it since his graphs are so far off, okay so now you won't even talk to him?  Notice you aren't convincing your parents of anything in any of these potential outcomes.  During this time he's being polite and smiling like an adult who's listening to a little kid give them advice, with a smirk to your parents once in awhile.  He's the one with shitty misleading graphs, but you can't prove it, and your graphs don't look as good as his.  Who do you think your parents will side with?
« Last Edit: November 07, 2016, 08:08:05 AM by ooeei »

CorpRaider

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #25 on: November 08, 2016, 01:32:52 PM »
I would probably only go if: (1) the purpose is to learn what they are invested in (of course looking at a statement would probably be easier and faster), or (2) they have decided for certain to stick with the EJ advisor and are asking you to help minimize the expenses/damage within those parameters. 

Having a meeting to convince a guy who is a paid adviser that his services are not required is a total waste of time, in my opinion.  If your dad simply wants you to hear his adviser's arguments for the unique value he brings, then MAYBE I would go just to listen and as a favor to my father.

An alternative would be to say, rather than meeting with the EJ guy why don't we set up a call with a Vanguard advisor (or even a Fidelity Rep to talk about their Robo advisor or whatever other cheaper options are palatable to him).  Or go get some Vanguard marketing stuff and forward it to him. 
« Last Edit: November 08, 2016, 01:40:24 PM by CorpRaider »

Goldielocks

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #26 on: November 08, 2016, 04:00:47 PM »
Find out how rear end loads (and if any apply) work!!!

Not EJ, but another similar firm, had a 7 year declining rear end load for half of the funds, but the advisor would switch out accounts / "rebalance" / change recommendations every 4 years or so (not all at once, but gradually, one fund at a time), so that we were always 3 years remaining for the rear load to be removed....   even when we had not added new money in over 8 years!   

Also, when withdrawing from an account that had been continuously invested in for over 15 years, when withdrawing 1/3 of the money, the rear end load calculation was a blended number....   we could not withdraw the year 10-15 year old money penalty free, because it was blended with the newer money, and we paid a proportional rear load accross all years.   

The actual EJ fellow I spoke to years ago about opening an account (we didn't) did not use rear load funds, but looked at investing in 15-20 individual stocks directly, so YMMV.  I have read that EJ corporate pressured the reps to move away from that, and use their directed advice on specific funds instead.

mizzourah2006

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #27 on: November 11, 2016, 09:44:28 AM »
Just an FYI loaded funds are going away for retirement accounts in all full service brokerages. Loads can only apply to brokerage accounts from now on, so definitely ask about the AUM fee as my understanding is it is pretty high. I think it's funny that everyone complained about the load fees, but now they are moving to a 1.25-1.3% AUM fee. For most people that are putting in $5-10k/yr and leaving it there for 10-20 years the load fee will end up being much cheaper than a continual 1.25% AUM fee (on top of the fund ERs), but everyone got what they wanted.

There are a lot of people hating on financial advisors, but there are a lot of people that feel much more comfortable having a "professional" manage their accounts. The professional may offer little to no value when it comes to total returns if the money is left through the volatility, but what about the people that panic and sell their Vanguard accounts because the market dropped from 2100 to 1800 and then buy back in when it is at 2200? Most people are not rational when it comes to their own money. There are hundreds of studies that provide support for this. So, you can say your parents are stupid for using an advisor, but if it helps them sleep at night and stops them from selling in a market panic the advisor has done their job. I don't use an advisor, but I can certainly understand why some people do and I don't call them stupid for doing so.

Bottom line be polite, ask the questions you want answers to, perhaps even help your parents understand why you asked those questions and why you thought they were important, but remember for many people safety is more important than total returns and to them that advisor offers them peace of mind.

Livewell

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #28 on: November 11, 2016, 01:17:18 PM »
My dad had his money with EJ, and when he passed I got a look into it.

The rep was a good one - nothing too crazy in the account, he had actually provided some decent advice but my dad had not beaten the market with him.  The problem was the fee structure - $800 for account maintenance on an Ira, plus as I recall a point.  He could trade as much as he liked.  So fair since the guy was paid more when my dad made more, but still a lot to give up in fees.

I went straight to vanguard, "your dad told me you liked to do your own thing" the rep said.  Yup!

My brother isn't so savvy and stayed in.  I haven't swapped numbers but I'd be willing to bet my vtsax is doing much better. 

You know the right move for your parents, maybe listen to the guy and ask about fees and then have a talk with them with real numbers about that yearly drag...

FIREby35

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Re: My parents want me to attend a meeting with their Edward Jones rep. Advice?
« Reply #29 on: November 12, 2016, 07:53:38 AM »
OP - did you have this meeting? How did it go?