Ed 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.