Edward Jones Q2 earnings fall due to slumping stocks

Edward Jones' advisor attrition slows as earnings take a beating

August 8, 2022 11:09 AM

Edward Jones is losing far fewer financial advisors from its ranks than previous quarters, but the company's hiring isn't keeping up with its attrition.

The St. Louis-based wealth manager, which is owned by a partnership called The Jones Financial Companies, disclosed its second-quarter results in an Aug. 5 filing with the SEC. A steep loss in earnings based on rising interest rates and falling stock and bond yields coincided in the period with Edward Jones' latest decline in advisor headcount.

The company's recruiting and training of brokers hasn't reached pre-pandemic levels due to the company's "continued strategy to focus on intentionally building the financial advisor pipeline" with greater corporate support toward their success, its earnings statement said.

Edward Jones "has begun offering greater flexibility and choice to its financial advisors through the options of co-locating their branches with one or more financial advisors in shared office space while maintaining their own individual client relationships, an expanded variety of branch support roles, and a pilot of multi-financial advisor team models," the disclosure said. "This approach may continue to result in fewer financial advisors hired than historical levels."

For the most interesting takeaways for advisors from Edward Jones' second-quarter earnings, scroll down the slideshow. To view coverage of Edward Jones' results in the first quarter, click here. And, for a review of its annual report for 2021, follow this link.

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Note: All figures refer when possible to the company's U.S. business rather than its combined results including those in Canada, where it had 845 advisors at the end of the second quarter. The company breaks out most, but not all, of its returns between the two countries.

Financial advisor headcount

Headcount losses tapered for the second straight quarter at Edward Jones. The number of financial advisors ticked down by 67 registered representatives, or less than 1% year over year, to 17,910. That's less than half the net reductions in the first quarter and fewer than a fifth of the amount leaving its ranks in 2021. Financial advisor attrition dropped to 6% from 6.6% a year ago, according to the company.

Client assets

Incoming client assets and their overall level fell due to slumping stocks in the quarter. Client assets under care decreased 7% from the year-ago period to $1.55 trillion, while net new assets tumbled 13% to $18.9 billion. Across the entire firm including Canada, asset-based fee revenue increased 2% to $2.4 billion because the rising interest rates prompted clients to boost their cash holdings and the company didn't pay as many waivers to ensure a positive yield on them. Advisory fees rose slightly as well, as wrap programs gained 3% in value from incoming assets and offset the stock losses.

Expenses

Costs climbed even though variable compensation for advisors dipped significantly in the second quarter. Edward Jones hired more non-advisor employees, spent more money on in-person events and made more investments in technology. Operating expenses hiked 6% year over year to $2.2 billion, while variable compensation dropped 14% to $406 million. The lower stock values reduced advisors' deferred pay as the company's partnership plan sustained losses on its fixed U.S. Treasury bonds with the higher interest rates, according to the firm.

Bottom line

The losses on Treasury instruments, the slumping stocks and lower transactional revenue pushed down net revenue 1% from the year-ago period to $2.9 billion. Net income before allocations to partners plummeted 21% to $349 million because the interest revenue related to higher yields on cash failed to offset the lower levels of business in the quarter.