EXCLUSIVE: Edward Jones’ Bid for Bigness Lags, CEO Says
Edward Jones, the fast-growing broker to the masses, has officially backed off its 20-20 Vision plan of employing 20,000 brokers by 2020, but remains in contention to be the world’s biggest broker-dealer by that time.
Following completion of a new five-year plan, the St. Louis-based partnership now expects to have 20,000 brokers spread across its franchise of mostly one-broker offices by 2022, Managing Partner Jim Weddle said in an interview this week with k-tcc.
Jones, whose profit rose 8.3% last year to $838 million before partner payments on $6.6 billion of revenue, ended 2015 with 14,508 brokers in 12,482 branches.
Edward Jones is heavily reliant on “boots on the ground” across the towns and cities of U.S. and Canada because of its knock-on-the-door approach to selling mutual funds and other products to mostly middle-income people in small communities. High attrition among recruits and unstable market conditions that hinder new-advisor referrals from current employees has hurt Jones in recent years.
“Either the failure to achieve hiring goals or an attrition rate higher than anticipated may result in a decline in the revenue the Partnership receives from asset-based fees, commissions and other securities related revenues,” Jones said in its annual 10-K filing last month with the Securities and Exchange Commission.
“During times of market volatility, current financial advisors can be less effective in recruiting potential new financial advisors through referrals,” it said. “Regardless of the presence of market volatility, the Partnership has not historically been able to consistently meet its growth objectives.”
Its aggressive push to grow the brokerage force has led some current and former brokers to assert that Jones is oversaturating itself in some communities and pressuring experienced advisors to refer clients for a small reward to newly opened offices.
“Our (national) market share is 2% to 3%,” Weddle said, scoffing at the saturation charge while acknowledging that in some small communities it has a more-than-15% share.
Jones is not a member of the Broker Protocol but Weddle denied that it has adopted hardball tactics against brokers who leave the company. Some former advisors said the firm has encouraged former colleagues in their communities to bad-mouth them to clients and has been filing arbitration cases seeking reimbursement of training and other costs.
One former advisor in the upper Midwest, who now works in the independent channel of a regional firm and spoke on condition of anonymity, said Jones even encouraged family members to attend sales meetings in St. Louis to help them support the “20-20 Vision” goals.
While Jones has missed its salesforce target, it is close to hitting other parts of the 20-20 plan. It has advanced its target of having $1 trillion of assets under management by 2020, for example, to $1.5 trillion by 2022, a spokeswoman said. The firm ended 2015 with $876 billion of AUM, or “assets under care,” as Jones calls them.
Measured by yearend 2015 brokerage counts, Jones ranked as the fourth-largest firm behind Morgan Stanley, Wells Fargo Advisors and Merrill Lynch.
Weddle, who is 63 and earned $13.95 million last year, said the company’s attrition rate for successful advisors is “amazingly” low at about one-half of 1%. A “significant” number of Jones’s brokers, however, are neophytes, and the firm “generally loses more than half…who have been licensed for less than three years,” according to its latest 10-K filing.