revoking withdrawal fee
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revoking withdrawal fee Thanks, everyone, I thought I'd get a rise over the 15% withdrawal fee. Wish I'd brought it up sooner. I have brought this up every time a member left and the response (charter members , of which there are fewer and fewer) is that "we agreed to that when we came into this". Then i always have to admit , yes, i did agree to it. But i will also admit that i wasn't paying close enough attention. the answer that indicates we might have a mass exodus has also occurred to me. the fact that we have already penalized our friends , about 18 or 19 in fourteen years, will irk. it irks me. I have proposed, several times, the idea of removing the penalty after x number of years. the idea that the fee initially means you have to be serious when you join. I will bring these replies to the next meeting. Perhaps it is time to invoke fee removal after x years and see where the dominoes fall. Deannie Hi Deanne,
I think the best way to handle controversial matters in the club is to contact the president and let her know you wish to make a proposal to the club regarding membership exit fees, and ask for a few minutes on the next agenda. You have a right to do that.
Then, simply state your case, read a couple of the comments you have received, REMIND the charter members that, one day, they too will want to leave the club and, as the market comes back, so will the size of their capital account.
If your club has a sizeable asset base, you might want to choose as an example the capital account of one of the most staunch opponents. "Cathy Clubmember, what if you or your husband became ill and you had to leave the club? Your $25,0000 capital account would generate an exit fee of $3,750. As the economy and stock market picks up, so will that fee." Make it personal, Deanne. Others will be mentally calculating their own fee.
Then, layout a proposal to reduce the fee to 5%, effective immediately, to be reduced by 1% every year thereafter. Members who stay in the club for 5 years would have the fee removed.
That was the point of the fee in the first place, right? Wasn't it to make sure people came and stayed? The fee, as it stands, is penalizing members "for staying" in the club. That should offend some members. And all you need to do is point that.
On controversial issues, I like to ask the president (when it's not me!) to go around the room and let everyone have their say. After that, I ask for a vote. Majority rules. It could be a good way end this once and for all. You won't be giving the charter members time to strategize.
Good luck to you. Do let us know how it turns out.
-- Lynn Ostrem garbagecop@gmail.com Join me at InvestEd 2010 August 6-8, Baltimore, MD www.investor-education2010.org Hello, I have been watching all the various ways each club has to handle withdrawals. Very interesting. I like the one where you charge a certain percentage in the beginning and drop the amount by 1% each year of membership. That one seems to make sense. In the case of the club I used to belong to, we charged a flat withdrawal fee of $25.00. If the person wanted cash and we had to sell stock to get the amount, then the W/D member had to pay the cost of the sale. If they wanted to transfer stock, Waterhouse would let you make the stock transfer from Club to Individual free. Some brokers charged. If there was a charge to transfer, the W/D member paid that cost. (Deducted from their check, so to speak.) Some members would open an account, transfer the stock, then sell the stock the same day or next day and get their $$$ that way. The idea of reducing the fee by a % each year really sounds good unless you are talking in really large amounts. After all, you are losing a payment from that member in the future and it is a way to stay afloat until you can get a new member or two. It may encourage members to stay............ That is the best solution. Myrelle McHale On 2/23/2010 9:18 AM, Lynn Ostrem wrote:
Myrelle,
All of your points are valid. However, let me give you a different perspective.
I've been clubbing for 17 years now. In the beginning, I played follow the leader. We had a 5% withdrawal fee because the Beardstown Ladies did. And so did the Mutual Club of Detroit, after which most clubs patterned their partnership agreement. We never asked why.
Obviously, it was because of the high cost of trades before the internet was born. As I matured and started doing a lot of club visits, I started asking why. And what! What is the late fee actually used for? What is the withdrawal fee actually used for? Most clubs couldn't come up with a good reason. And when our club discussed it, and couldn't come up with a good reason either, we dropped the fees.
I don't think the 5% declining W/D fee is unreasonable. I understand that it's a deterrent. But I have to ask this. Why would you want someone to stay if they really didn't want to be there? That creates a bad attitude, and usually a lack of participation which can become a cancer that eats through club morale. If one person gets away with sitting back and doing nothing until the W/D fee gets lower, then so might the next person. I have discovered, through experience, that it's much less costly to let a member go when they want to.
You can still have them pick up the cost to transfer or cash in stocks. Today, even at the full service brokers, it's pretty reasonable. Why gouge them?
Further, there's no need to "stay afloat". Not like $25 would keep you afloat anyway! <G> The club has NO assets. All the assets in the club's coffers belong to somebody. If a member leaves and takes his/her capital account off the table, there's no harm done to the club. Or to the returns. A 15% return is valid and worthwhile, whether it's on $30,000 or $5,000. It's what you make of it. The dollar amount in your club account doesn't matter. A lot of people don't see that.
If you want members to stay, you encourage them by producing well-thought-out meetings with great education benefits. You play silly investing games and contests to keep the mood light, and you give praise (in the form of token gifts) to recognize a job well done.
As an aside, I have to tell you this cute, but powerful little story about late fees. In a previous club, about 12 years ago, we had this guy who was habitually late to the meetings. We brought up the possibility of assessing a late fee of $5 on anyone who was more than 10 minutes late (this guy was usually 30). He leaned over to me and said, "Lynn, I would gladly pay an extra $5 per month if it meant getting you off my A**."
So the fee wasn't going to resolve the problem - for two reasons. First because the fee actually gave the member an acceptable alternative to being on time. And second because the penalty wasn't great enough. I tell clubs today that if you intend on having a late fee, make it double the dues! Make it hurt! <G>
Just food for thought!
Lynn Ostrem
Crow River Investment Club
Join me at InvestEd 2010 > The idea of reducing the fee by a % each year really sounds good
unless you are talking in really large amounts. After all, you are
losing a payment from that member in the future and it is a way to stay afloat
until you can get a new member or two. <
I think it would be inappropriate
to penalize a withdrawing member because of future investments they won't
be making with the club. Thinking along
similar lines, I also think it's inappropriate to penalize a
member if they skip making routine monthly investments for a while (which means,
of course, that I think it's wasted effort to try to keep all members
"equal").
The money a member puts into an
investment club (and any resulting profits or losses) belongs to that
member. When a member withdraws they are taking out their own money, not
the club's money.
-Jim Thomas I love your points to ponder. I remember reading the Beardstown Ladies as a prerequisite to joining the club. After a couple years, I too started looking around for ways to make things fun. We held contests and used an artificial bank account and the winner (over a 3 month period of time), won a prize. I also created a multi-colored spread sheet to show ST and LT growth in our various stocks. I loved the challenge of trying to make things fun. I even wrote to you around 2003 or later and you shared your club's annual report with me so I could gain some idea of how to do one for ours. Our club had/has some extremely intelligent ladies and the reasons for their W/D were mainly due to physically moving to another city. (Or health issues.) You are right in that the $25 will not 'save' the club. Smart investing will. That was just a number that existed prior to my joining the club and no one found a reason to question it nor change it. All things are relative and when you talk about a 15% return being valid, you are absolutely correct..... You are working with different totals, that's all. Thanks for putting another picture out there for all................ And I love the story about the guy who was late. Another good point made by you. Bye for now. Myrelle On 2/23/2010 1:02 PM, Lynn Ostrem wrote:
Well, this has been fun! I have called the president and we agree it should be discussed and I will use the method presented. President and I thought maybe the 15% came from the Beardstown Ladies but i see that it did not. That we will continue to search for...... I have been amazed each time i brought this up, that our w/d fee is our best investment tool, it only draws a chuckle and no action. The example of what our largest percentage member's w/d fee would be is a great idea. BTW, the president is not a charter member and has no problem with the 15%. She has no intention of ever leaving. the vote will be interesting. the comment that "if the fee is all that is keeping you there, you are probably not a contributing member" is also true. I will keep you posted. Deannie Deannie Rule wrote: > Thanks, everyone, I thought I'd get a rise over the 15% > withdrawal fee. Wish I'd brought it up sooner. I have > brought this up every time a member left and the response > (charter members , of which there are fewer and fewer) is > that "we agreed to that when we came into this". Then i > always have to admit , yes, i did agree to it. But i will > also admit that i wasn't paying close enough attention. > > the answer that indicates we might have a mass exodus has > also occurred to me. the fact that we have already > penalized our friends , about 18 or 19 in fourteen years, > will irk. it irks me. I have proposed, several times, the > idea of removing the penalty after x number of years. the > idea that the fee initially means you have to be serious > when you join. > > I will bring these replies to the next meeting. Perhaps it > is time to invoke fee removal after x years and see where > the dominoes fall. > > Deannie > BTW, the president is not a charter member and has no > problem with the 15%. She has no intention of ever leaving. In a sense she's right. The members who can arrange to still be around when the club eventually disbands can also be the only ones to avoid the withdrawal fee. A withdrawal fee takes money from the withdrawing member and distributes it among the remaining members (with most of the withdrawal fee going to the remaining members who own most of the club). The very last person to withdraw when the club eventually disbands can't be charged a withdrawal fee because there will be no one else left to receive that money. So, when a club disbands, the only fair thing to do for those final members is to waive all their withdrawal fees (which, of course, is unfair to all the members who withdrew before). If the club were to decide to keep the 15% withdrawal fee, it seems only fair to me to add a requirement that the club can not disband without first donating 15% of it's total asset value to charity (to make up for the 15% withdrawal fee that won't be charged to those final members). -Jim Thomas |
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