Edward Jones sets ambitious goal of 30K brokers
After achieving record advisor headcount and client assets last year, Edward Jones has set itself a new lofty goal: 30,000 advisors, nearly 13,000 more than it currently fields.
But it’s more than simply a number to shoot for, says Penny Pennington, who took over leadership of the firm as managing partner earlier this year. It’s a mindset.
“Thirty thousand gets us thinking about the different ways we need to grow, the diversity of the talent we require, the metropolitan marketplaces where so many clients live,” she tells On Wall Street.
Pennington’s goal, which does not have a deadline, ups the ante on her predecessor’s vision of reaching 20,000 brokers and $1 trillion in assets by 2020. The company has already achieved the latter. Edward Jones reported net revenue for 2018 of $8.5 billion, up 13% year-over-year, according to an SEC filing. The St. Louis-based firm’s advisor ranks hit 17,615 for 2018, up 9% from the prior year. Such rapid growth has put Edward Jones in a position to challenge Morgan Stanley and LPL Financial for bragging rights as the largest broker-dealer by headcount (Morgan has about 15,000 advisors while LPL has approximately 16,000).
The firm’s new leader Penny Pennington tapped managers, one a longtime veteran of the firm, for the executive committee.
The firm is finding success despite being outside the Broker Protocol.
The firms may or may not be vying against one another, but their advisor forces are moving in different directions.
To keep its headcount growing, the firm has traditionally relied on its large in-house training program to attract a range of trainees, from recent college graduates to professionals looking for a second career. Pennington herself became an Edward Jones financial advisor in 2000 after a career in banking, saying she came across the company after doing a search on Monster.com.
“I loved the business model because it mattered if I showed up every day. It mattered whether the clients trusted me. That was attractive,” she says.
The firm also has recently expanded its efforts to include recruiting talent from rival companies. Last year, Edward Jones added 1,500 net new advisors, of which approximately 225 came from competitors, according to Pennington.
But the firm’s unique one-advisor office model might limit its appeal to wirehouse and regional BD advisors, many of whom operate in teams.
“It gets to how those FAs and teams want to work,” Pennington says. “If their M.O. is that they want to work in an environment where there are a number of people sharing in how to serve the client, then that could be a little challenging to come to Edward Jones. Our model is that the client knows who their advisor is. It’s very clear who they go to for advice and who they have conversations with that they might not have with anyone else.”
In addition, Edward Jones is not a member of the Broker Protocol, an industrywide pact that sets rules governing the movement of brokers between firms. It also requires brokers to sign non-solicitation agreements intended to protect what it sees as its investments in financial advisors in the form of training and resources.
Pennington says she dislikes discussions regarding ownership of books of clients. “I know there are formal contractual things, but I get concerned about a client sitting in the room and we’re talking about who owns you. I don’t like that line of conversation because it’s not client-centric.”
The firm’s traditional training program is likely to grow in scale, Pennington says. Plus, Edward Jones plans to add more resources and training for existing advisors. It’s about growing not just in size but also in depth with current FAs, Pennington says.
The firm is also striving to attract more minority, women and young people to the profession. The average age of new advisors at Edward Jones is 37, according to Pennington. Industrywide, the average age of a financial advisor was 51.8 years old in 2017, according to data from Cerulli Associates. The firm also introduced last year a bonus for retiring FAs to hand over their practices to younger women and minority advisors.
“Clients need and deserve a choice about the people who are taking care of their needs,” Pennington says. “Having diversity in the resources and talent that we are bringing to bear is key. Clients are telling us they want this.”
For Pennington, who is the sixth person to lead Edward Jones as managing partner, it's another way the firm needs to continually reevaluate its approach to wealth management after nearly a century in business.
“When I think about leadership of the firm and when I talk to branch leaders and advisors, we’ve been relevant to clients for 97 years not because we stayed the same,” she says. “We’ve done it because we’ve evolved to meet their needs. So how do we stay relevant for another 97 years?”