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April 18, 2017

Ed Jones Sweetens the Pot for Experienced Brokers

by Mason Braswell
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News
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Edward Jones
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Comments (16)
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Edward Jones Sweetens the Pot for Experienced Brokers

Putting meat on the bones of its new plan to concertedly recruit veteran brokers for the first time in its 95-year history, an Edward Jones executive has laid out in an interview the goals and tools the firm will use to carry out the strategy.

The St. Louis-based firm, the largest U.S. broker-dealer as measured by its more than 12,000 mostly single-advisor offices in all 50 states, aims to hire up to 60 experienced brokers with over $250,000 in production this year, Katherine Mauzy, the firm’s principal in charge of financial advisor acquisition, told AdvisorHub. That contrasts with Jones’s traditional recruit, who is a career-changer internally trained by the company, and with the roughly $440,000 average annual production of all its current brokers, according to an analysis of its latest annual report.

In 2016, Jones attracted just 38 new brokers at the $250,000-and-higher level.

“It’s a very, very appealing business model,” said Mauzy, a former UBS recruiting director who joined Jones in 2010, contrasting the two-person (broker and branch administrator) offices with the top-down bureaucracy of a big branch at a bank-owned broker-dealer.

The technology, product mix, support and capital that once gave wirehouses and large regional firms a stranglehold on top brokers has become something of a commodity, she insisted.  “While we probably weren’t in the consideration set in the past, there has been so much enhancement to product platforms and capabilities in the past decade,” she said.

To be sure, Jones executives, who share in profits of one of the last partnerships in the brokerage industry,  have no intention of matching the rich “forgivable loan” signing bonuses that big firms such as Merrill Lynch, Morgan Stanley and UBS still offer to lock in million-dollar producers.

Those firms are promising upfront bonuses of 100%-175% of the revenue a broker produced over the previous 12 months to brokers who stay five to nine years. And even big regionals such as Raymond James Financial and Stifel are paying up to 125% of the so-called trailing 12 to lure big producers.

Jones is playing by extending to one year from six months a guaranteed match of the broker’s previous year’s compensation, or 100% of their trailing-12-based payout, and by enhancing payout for new assets brought into the firm within the recruit’s first year at the firm.

“None of this is a forgivable loan, none of this is a handcuff or any of the things that get them wrapped up in why they have to move every seven to nine years,” said Mauzy.

A million-dollar producer who brings over 80% to 100% of assets from his or her former firm will qualify for a deferred cash bonus of $900,000 to $1.25 million paid over two to six years, she said. That’s not a tough goal, she added, since 95% of newly hired Jones brokers with any experience attract more than 80% of their book in the first year, she said.

Jones currently employs just over 14,900 brokers and aims to have 20,000 by the end of 2022. To help get to that goal, the firm has launched a $6 million ad campaign aimed at brokers to “shift misperceptions about Edward Jones,” the company said in a news release.

Industry recruiters are skeptical that many top-tier brokers will take the Jones bait. Jones’ growth plans have already created tensions with existing brokers when new branches open nearby and still has a reputation as a one-trick pony that sells mutual funds to middle-American Ma-and-Pa investors. Most top big-firm brokers want a rich array of alternative investments that can bring extra yield to wealthy, risk-accepting customers, said Rick Rummage, a headhunter in Herndon, Va.

Jones has made rudimentary efforts in the past to attract big-firm advisors “but they’ve not been successful at it,” he said.

To be sure, Jones does not use outside recruiters, which could poison their commentary.

A bigger issue may be that Jones is not a member of the Protocol for Broker Recruiting and, according to Mauzy, has no intention to join. The pact permits brokers moving among the more than 14,500 Protocol signatories to bring core customer contact information with them when they move without fear of being sued by their former firms.

“It hasn’t seemed to be a headwind like all the recruiters like to say,” Mauzy said. “People move, and follow guidance and support from our team, and they’re allowed to announce to clients where they have gone.”

Jones itself has brought arbitration claims against brokers who leave the firm with customer data.

As for existing Jones brokers who may confront the former wirehouse advisors as competitors in their small markets, Mauzy insists that Jones’s culture of partnership and camaraderie will prevail.

“We have this shared mission to grow the firm, so all the advisors are aligned,” she said.

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Comments (16)
  • on Apr 18 2017, Nick says:

    Does anyone else see the absurdity of EJ wanting to hire 5,000 brokers in the next 5 years?

    > Reply to Nick
    • on Apr 18 2017, Todd says:

      what does the average FA produce at EDJ

      > Reply to Todd
      • on Apr 18 2017, Mike says:

        Todd, as the article states, the average annual gross production at EJ might be $440,000 but because of the high percentage of “home grown” inexperienced advisors you would find the median production to be much lower.

        > Reply to Mike
      • on Apr 19 2017, Gabriella Milley says:

        Average FAs produce $200,000 to 250,000 and get a 40% payout in the first 3 – 5 years

        > Reply to Gabriella Milley
    • on Apr 19 2017, Gabriella Milley says:

      There is a very big difference between “hiring” and “retaining” personnel. EJ hires lots of inexperienced people and tries to “train” them into becoming FAs in their “system”. It has a very low retention number and then they make sure to soil the U5 of any FA that leaves.

      > Reply to Gabriella Milley
      • on Apr 23 2017, jeff dinkel says:

        Gabriella. You state ” low” retention. What does that mean? Any data to support that? How does that compare to the industry? Do others pay for training?

        > Reply to jeff dinkel
    • on Apr 19 2017, Mike Jordan says:

      Thief River Falls MN is a town of 8500 with 11,000 in all of Pennington County – there are FOUR EJD offices here!

      > Reply to Mike Jordan
    • on Apr 23 2017, jeff dinkel says:

      Why is that “absurd”. What’s wrong with growth?

      > Reply to jeff dinkel
  • on Apr 18 2017, Diogenese says:

    Much like the sweeper at the end of the parade Jones will capture the sub $400M advisors that firms like Ameriprise, Stifel, Baird and Raymond James will no longer consider. They are really not changing their market stratification they are just competing with the INDI offerings that so many small producers are finding as a last option…

    > Reply to Diogenese
    • on Apr 19 2017, Aristotle says:

      Really? Why do I see these 2 or 3 person Merrill & MS teams that produce $1.0 – $1.5 MM all day long. BTW those $400k produces at the Indys take home minimum $300k, which is probably $50k more than MS advisor on a 2 person $1 Million team. Sounds like advisors are just waking up and getting smart.

      > Reply to Aristotle
      • on May 3 2017, Innocent bystander says:

        In what world does an EDJ $400k producer “take home” minimum $300k?? Last I knew, your BOA salary, your health insurance, your office rent and other expenses came out of what was left AFTER the firm took the first 56-58% of your gross production. So, right after the first dip into your production comes out, you’re already under $200k.

        > Reply to Innocent bystander
  • on Apr 18 2017, Mike says:

    Interesting double standard. It’s OK to bring clients in from another firm but try to leave with them and you’ll likely find yourself in court accused of stealing proprietary information. If Jones can sue departing advisors because as a Jones attorney told me “We don’t know what the Broker Protocol is.” can Jones be sued for acquiring what they describe as “confidential proprietary information” since they would not be protected by the protocol agreement?

    > Reply to Mike
  • on Apr 18 2017, Waspy McWaspface says:

    What percent of Ed jones FAs have T-mobile as their cell carrier?

    > Reply to Waspy McWaspface
    • on Apr 19 2017, Aristotle says:

      Wow, Waspy. Next thing you’ll be telling us about your Izod shirt or your chick’s Luis Vuitton bag. So, last decade.

      > Reply to Aristotle
  • on Apr 19 2017, Waspy McWaspface says:

    Aristotle- are you on the pre pay t-mobile plan? I hope posting that comment didn’t cause you to go over on your minutes

    > Reply to Waspy McWaspface

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