Edward Jones Broker Count Up 5%, Firm Pauses Branch Growth
Edward Jones, the largest retail brokerage firm as measured by its 19,000-plus brokers in mostly two-person branches, is warning about a slowdown in growth.
Uncertainties about the resurgent Covid-19 pandemic and its effect on work-from-home practices, however, has put a pause on branch openings, Jones’ chief source of growth.
“[T]he partnership typically enters into branch office leases for new locations regularly,” the 10-Q filing said. “Given the current state of the global economy in response to the COVID-19 pandemic, the partnership has temporarily paused entering into new branch lease arrangements.”
Jones ended the third quarter with 15,403 offices, comprised primarily of a single broker and a branch office administrator. A “small number” of new advisors are working from home, a company official said.
Unlike many of its rivals, Jones has not prohibited brokers from working from their offices during the pandemic, and has lifted restrictions in some geographies on meeting clients and prospects there.
It also is now cautiously negotiating to lease new offices, a process that takes six to 12 months, said John Lee, who runs the firm’s real estate operations. “We will continue this approach to building branches based upon the environment,” he wrote in an e-mailed statement.
Jones’ third-quarter revenue grew 7% to $2.5 billion on market appreciation and inflows into fee-based accounts, while operating expenses were up 6% to $2.2 billion, according to the filing. Total assets under management as of September 30 grew 9% to $1.384 trillion from the previous year.
Profit distributed to the firm’s roughy 25,000 general and limited partners soared 12% to $316 million in the quarter.
Net new assets brokers attracted from clients last quarter fell 7% from the comparable 2019 period to $13 billion, and the filing warned that uncertainties about the economy and the impact of COVID-19 could lead Jones to take additional cost-control measures. The firm earlier this year paused certain “strategic firm initiatives” and reduced non-advisor hiring.
Jones, which employs a large number of second-career advisors, also had warned that attrition could rise if brokers find it hard to build their businesses during the pandemic. The departure rate of 6.8% in the July-September period improved from 7.9% in the year-earlier third quarter.
Jones earlier this year said it would offer zero-interest loans to brokers to help them navigate hits to their pay from a virus-impacted environment. A company spokesman declined to say if any took the offer, which was made in the earlier days of the pandemic when markets that subsequently surged were cratering.
In its initial response to the pandemic, Jones also froze raises for branch office administrators and home office personnel, but has since restored them.