Edward Jones Locks In Lead as Biggest U.S. Brokerage Force
While its bank-owned national competitors were tightening recruiting strings last year, Edward D. Jones & Co. grew its brokerage force by 8% and expanded its mostly single-broker network of branches by 14%.
The St. Louis-based broker-dealer, which derives about 75% of its revenue from selling mutual funds and insurance to middle-class households, ended 2017 with 16,095 financial advisors working out of 13,449 branches, according to its parent company’s annual 10-K filing with the Securities and Exchange Commission.
That would seal Jones’ position as the biggest employer of brokers, a mark won when it bypassed Morgan Stanley Smith Barney last year. Morgan Stanley finished 2017 with 15,712 brokers, down 51 from a year earlier in 597 offices.
To be sure, wirehouses such as Morgan Stanley and Merrill Lynch generate much more revenue and profit for their parent banking companies than Jones does for the partnership that owns it. And, as warned in its regulatory filing, its hold on the amalgam of untrained and second-career brokers who join is tenuous.
Jones “generally loses more than half of its financial advisors who have been licensed for less than three years,” its regulatory report says. Attrition in 2017 fell to 7.2% from 9.1% and 9.7% in the previous two years, but “given changes to regulatory requirements, performance standards and financial advisor compensation, there can be no assurance that the attrition rates the Partnership has experienced in the past will not increase in the future,” it said.
Jones, which is experimenting with trying to recruit more experienced brokers with at least $250,000 in production, also was sued last week by early-career advisors who claim the firm illegally charged them for their training costs after they failed to make the grade or left for other jobs.
Edward Jones’ 2017 net income soared 16.8% to $872 million from a year earlier on a 14% jump in revenue. (An exception is Jones’ 596 branches in Canada, where it has operated since 1994. “The Partnership has made, and may be required to continue to make, substantial investments to support its Canada operations, which have not yet achieved profitability,” the filing said.)
More than 80% of Edward Jones’ profit, or $654 million, was distributed to the firm’s 418 general partners, according to the regulatory filing. The biggest beneficiaries among the five executives at the top of the chain were its managing partner, James Weddle, whose total compensation rose 2.1% to $11.4 million, and its chief financial officer, Kevin Bastien, whose compensation was up 17.1% to $11.8 million (including a partnership distribution of almost $10 million).
Daniel Timm, the firm’s general partner in charge of branch development, earned $10.6 million, up 10.3% from his 2016 compensation. Timm’s sister-in-law Kim Renk, a broker based in Minnesota who has been with Jones for 23 years, became a general partner in 2016 and earned about $933,000 during 2017, according to the filing.