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Maybe You Shouldn’t Hang Out with Eddie
In this adaptation from Golden Reserve Founder Greg Aler’s new book, Fire Your Financial Advisor, we examine the villainous role Edward Jones has played in creating a retail financial advisor industry that pushes the limits of greed.
When you were in school, your parents probably told you not to hang out with certain kids who weren’t always sticking to the straight and narrow. While you’re now older and wiser, we need to impart one more piece of wisdom. Please, don’t get caught up with that Edward Jones.
Fun fact: both Edward Jones (yes, that Edward Jones) and Golden Reserve founder Greg Aler attended the same small-town Ohio high school, Bellefontaine High. While both would go on to create financial services firms, that’s where the commonalities end. One would build their firm on the founding principle of protecting retirees from high fees and risky investments. The other would build their firm doing…well…the opposite.
In fact, Edward Jones has done much to shape the retail financial advisor industry, but perhaps not in the way you think. So, how was his firm able to grow from nearly $5 billion in revenue in 2013 to more than $12.3 billion in revenue in 2021? A closer look at its overpriced mutual funds, recent settlements and legal proceedings may provide the answers.
Eddie’s Funny Business with Fees
Edward Jones sets the standard (in all the wrong ways) for selling mutual funds with up-front load fees, charging 5% or more. This can be in addition to their ongoing advisory fees –every year at around 1.35%. They may even charge an “exit fee,” should you decide to transfer an account away from Edward Jones.
These fees are astronomical. So why aren’t more people talking about them? Simply put, because they don’t know. Edward Jones discloses the fees in the deepest, darkest corners of their fine print, where you’re least likely to find them.
Eddie’s Kick-Back Scheme
Then there are the allegations of revenue sharing payments– essentially undisclosed kickbacks from mutual fund families Edward Jones recommended to its customers– which landed Eddie in hot water with the SEC. That led to a $75 million settlement in 2004, which may sound like a lot, but really amounted to a drop in the bucket for Edward Jones. Then in 2006, they settled 9 class action lawsuits related to the undisclosed kickbacks with a $127 million settlement. And hey, now they’re disclosing their revenue sharing! You can find it conveniently located in another dark corner of their fine print.
Eddie Won’t Change His Tune
But that’s not where the story ends. In 2018, the company was sued in another lawsuit alleging brokers were pressured to move middle income clients into advisory accounts that could charge up to 2% of assets under management annually, even though the clients engaged in little trading. Eddie did provide disclosures on this one, though the investors in the complaint argue they didn’t receive “full information.” (Perhaps it was located in a different dark corner?)
The closely watched lawsuit has since been dismissed, reintroduced, and in 2022 dismissed again. Regardless of the outcome, the takeaway remains the same: retirees shouldn’t have to worry their savings will be bled to death by high fee investments, or fear what could be hiding in the depths of fine print.
There will always be bad apples; the ones who keep pushing the limits to see what they can get away with. Unfortunately, we believe Edward Jones is one of them. Will the company ever change its tune? It’s doubtful. Which is why in order to stay on the right path in retirement, we tell our friends and family to stay away from Eddie.
Fire Your Financial Advisor is available now on Amazon.com and on our website. To get your copy, or download a free chapter, click here.
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