Choose Edward Jones--More locations than Starbucks

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Aug 20, 2010 10:03 am

"Financial services firm Edward Jones is planning to add more than 236 branches in the greater Seattle area over the next five to 10 years, said company spokesman John Boul.

The expansion would more than double Edward Jones' presence in the Puget Sound region. The firm currently has 209 branches in the area." --Puget Sound Business Journal

Seattle, WA.  The home of Starbucks.  You can go to one Starbucks and literally see another, sometimes across the street.  If you add up all the stores in the greater Seattle area and include the mall and grocery store locations, there are 433 Starbucks locations.  Edward Jones plans to have 445 offices. 

Aug 20, 2010 10:34 am

Man, that is just retarded.

However, I look at my area, and how many branches they think they will put up, and I laugh.  Let's just say I live in one of the smallest states in the country, and they are projecting a range of 500-1000 additional branches.  We currently have like 75 in our state, and they can't add them as fast as they are dropping.  Even worse, we only have 75 in our state, and there are soon going to be 4 in my little town, with zero in the next 3 towns in any direction.  Now, there is PLENTY of business, because we are not bound by borders (most of my clients don't live in my zip code), but it just looks ridiculous to people when we have 4 fukcing office within stones throw of each other, each with ONE advisor.  People think we are nuts.

Aug 20, 2010 10:39 am

B- You are slaying me!  That's a funny post.  I couldn't agree more.

Aug 20, 2010 11:43 am

[quote=B24]

  People think we are nuts.

[/quote]

That thinking will get much worse when they see that all new offices have a drive through window.

Uniforms are just around the corner. 

Aug 20, 2010 12:03 pm

To get this done they will have to hire a ton of rookie reps!

They will go through reps like $H!T through a goose.

Aug 20, 2010 12:16 pm

Joking aside, I always thought the Jones model was clever, maybe not from the rep's point of view.

The public doesn't really "get" financial planning - the comprehensive nature of what we do. It isn't just about asset management.

So you have all of the reps (really just asset gatherers and insurance people) scattered around the neighborhoods, and visible, instead of holed up together in some downtown office.

The reps are motivated to go out and talk to the people, instead of other reps. The office itself is a little advertisement for the brand.

Aside from snoot factor, the office is plain and accessible, there is always a receptionist available even when the rep is out meeting new clients on the golf course, or getting charged up with other reps in Hawaii.

A lot of the walk-in business is small accounts, but some of these turn big over time when the local bank rep slips or the small business owner makes it big. If the rep is good at selling insurance, there is good cash flow from permanent insurance and DI  and LTC sales.

The company could even provide a spiff for P&C referrals from walk-in business, through an 800# outside carrier.

The rep feels like an owner, with the security of employment. Is 450 Jones reps too many to serve all of Seattle? Half of them would likely be trainees or essentially asset gatherers for the other half.

Even if things change and 12b1 fees go away, Jones would adapt. You just have to make things tangible and personal for people, and find out a way to charge for your personal services. Who is their biggest competition for the mass affluent, going forward? If you had to work another fifteen or twenty five years, you could do worse than own a local Starbucks store. Everyone knows where it is, they have great coffee that is not cheap, and the more stores there are, really, the more coffee people drink, especially when it's raining (market volatility) which is most of the time these days.

Aug 20, 2010 12:53 pm

Maybe the frustrating thing for a Jones rep,once you are established, would be knowing you could be making the same amount of money, net by working half the time. Literally, twenty some hours a week, with lower overhead and zero corporate expectations, and more control over the business (non-compete).

And it takes a few years and a lot of work to "get there" whether you use the franchise, or not. But for the right personality, the franchise and the service fills a huge hole in the market.

More interesting, what will happen going forward? I'm trying to think of some neighborhood RIA full service franchises, and all I can think of is The Mutual Fund Store. That's more like one store per metro area, and the marketing is driven off a radio show.

It would be interesting to see a franchise chain of RIAs, with a higher bottom line to the owners. Maybe an ex-EDJ guy will seize the market opportunity some day. Just pondering.

Aug 20, 2010 1:27 pm

Didn't starbucks end up closing like a 100 of their stores cause they expanded too quick?

Aug 20, 2010 1:49 pm

10th,

That was a pretty good summary of Jones.  I agree, I think people seem to relate to us better than some of the wirehouses.  Regardless of the fact that our back office and product offering is pretty much the same as the wires, the "perception" is that we are the "local guy".  I have had MANY prospects and/or clients tell me this.

As I have said before, the one-man local office really IS our differentiating factor.  We capture a lot of the business that does not/can not go to wirehouses.  And I sort of lump small indy offices in with how Jones does business (sorry guys), because that's how some people perceive us, as compared to wires.

It's funny, years ago when The Mutual Fund Store used to post their model portfolios online, I checked them out.  The fund selection and portfolio process was almost identical to Jones' Advisory Solutions.  I think when I checked, the only office in our area had like $15mm AUM in it.  Most of them average 15-25mm AUM, although some of them, especially in Adam Bolds area (KS), have much higher AUM.  I think Bold's office has like 550mm. 

Aug 20, 2010 2:04 pm

this makes it hard to be taken seriously when you're using opening cold call lines like "m/m, this is ______ with Edward Jones. i've recently had the opportunity to add one additional investor to my business..."

Aug 20, 2010 4:14 pm

24, it's no secret that this is commodity business (investments, advice, insurance).

Getting people to come to you for products and service is so much better than chasing them around.

Branding and marketing are powerful and come in many forms, but a sale is a sale.

The whole image of the cold calling wirehouse cowboy serving the "wealthy" is a (dying) myth.

I've always respected Jones, even checked them out - not my cup of tea, but still a respected competitor.

Aug 22, 2010 9:29 am

Spam, they ran the same grassroots ad in Tampa, too bad they are using the rookies to fill the 4 empty offices from last week. Not much expansion there.

Aug 23, 2010 11:34 am

B - (in my most sarcastic, yet trying to be funny voice) I don't want to hear any complaints about the 4 other offices in your town.  I'm in the Jones capitol of the world and I've got 30 other FAs within a 5 mile radius of my office.  Forgive me if I chuckle a little bit when you complain about the 4 in town with you. 

It's always funny for me to travel to other parts of the country and talk with Jones guys.  I went on vacation to a little town in the Poconos a few years ago and while my wife and I were walking around, we stopped by the local Jones office to say hi.  I asked the FA where the other office in town was.  He looked at me like I was crazy then went on to explain how unhappy he was with his RL because they were going to add another FA in the COUNTY next to him.  30 miles away.  I chuckled at him, like I did you, and told him that I drive past 5 other Jones offices on my way to my office every morning.  It's only a 4 mile commute. 

I wouldn't say the STL area is an incredibly wealthy city.  We've got our fair share of money, but we're not Monterey, CA.  I think one of the things Jones is looking at is with a more robust fee based platform, we can have a lot of offices with $40-50 mil AUM doing just fine.  Used to be that if you wanted to do $500K a year gross, you'd have to have an office up in the $80-100 mil range to do it comfortably. They've always targeted $750mil as the TLIA that would support a Jones office.  It wouldn't suprise me if they dropped that number in the future to justify more offices in some locations.   

Aug 23, 2010 12:27 pm

Walgreens, Starbucks, Gas Stations, Mc Donalds, EDJ... Not exactly the kind of category i want my advisor in...

Jones doesn't have a choice. And to their credit, it seems to be working well so far. However like starbucks they will reach a critical failure point and have to shut down offices..But you have to ride the horse that brought ya..

Aug 23, 2010 1:49 pm

[quote=Spaceman Spiff]

B - (in my most sarcastic, yet trying to be funny voice) I don't want to hear any complaints about the 4 other offices in your town.  I'm in the Jones capitol of the world and I've got 30 other FAs within a 5 mile radius of my office.  Forgive me if I chuckle a little bit when you complain about the 4 in town with you. 

It's always funny for me to travel to other parts of the country and talk with Jones guys.  I went on vacation to a little town in the Poconos a few years ago and while my wife and I were walking around, we stopped by the local Jones office to say hi.  I asked the FA where the other office in town was.  He looked at me like I was crazy then went on to explain how unhappy he was with his RL because they were going to add another FA in the COUNTY next to him.  30 miles away.  I chuckled at him, like I did you, and told him that I drive past 5 other Jones offices on my way to my office every morning.  It's only a 4 mile commute. 

I wouldn't say the STL area is an incredibly wealthy city.  We've got our fair share of money, but we're not Monterey, CA.  I think one of the things Jones is looking at is with a more robust fee based platform, we can have a lot of offices with $40-50 mil AUM doing just fine.  Used to be that if you wanted to do $500K a year gross, you'd have to have an office up in the $80-100 mil range to do it comfortably. They've always targeted $750mil as the TLIA that would support a Jones office.  It wouldn't suprise me if they dropped that number in the future to justify more offices in some locations.   

[/quote]

Spiff, I know what you're saying.  You may not have picked up on it in my post, but I did state that I haev no problem with more FA's per se, because there is plenty of business to go around.  My issue is with having 4 physical offices in a town with like 6000 people and not much good office space.  My point was that, as a firm, we look stupid for having even TWO offices.  When people say "oh yeah, you guys used to have an office over by such and such", I have to say "yeah, it's still there".  And they look at me like I'm nuts.  It just seems so silly to have multiple physical offices for a few FA's in the same little town.  On top of that, clients somehow relate overhead to what they pay in fees (which in the end may be true).  So they start to wonder, why in the world if you have this huge extra office in your office, why that FA has to leave and open another office right down the street.  And I'm sorry, but I'm not going to march out the "Edward Jones hires entrepreneurial go-getter blah blah blah's" speech that we hear from Jones all the time.  I wish they would just man up and tell us really why we can't have multiple FA offices.  Is it Compliance?  Is it because they are afraid of teams banding together and going indy?  Is it because it would screw up bonuses because multi-FA offices would be more profitable?  What IS it?  I mean seriously....even TWO FA offices would cut our field overhead by like 30 or 40%. 

In big cities, there's no way around it.  You still will have a lot of offices.  I'm NOT advocating big wirehouse-type offices.  If you have 100 FA's in a metro area, maybe you could go to 50 offices and save $100K per month in over head (saving $2K per month would even be conservative).  That would be 1.2mm per year in savings per 100 offices.  So maybe I just saved the firm $120mm.  (5,000 offices x $2K/mo x 12 mos.).  SOme of those multi-FA offices could be covered by only one BOA, so you just saved even more.  Call it $150mm per year.  That's a lot of dough back in everyone's pockets (you listenin' Geeps?)

Aug 23, 2010 6:59 pm

just a thought, how can one respect Edward Jones.  They are a good firm in bull markets but what happens in a flat to down market?  Can they do options?  Not that I do a lot of options but it's a great hedge in certain markets.  They always want 2nd and 3rd career type individuals which I have no problem with.  I just wonder if they want those individuals because they may not know better.  Anytime I meet with a prospect and they are currently with Jones, I simple say they have a great offering for up markets, flat to down- not so much.  

The days of putting an Ibbotson chart in front of a client and explaining why 90 years worth of data is relevant in this market are over.  Buy and forget is not an investment strategy..

Aug 24, 2010 9:16 am

bb5, I sort of agree with you.  But to be honest, most wirehouse firms are not much dfferent in terms of philosophy.

Here is Jones' problem: they were stuck for many years in a mode of catering to baby boomers.  Well, those boomers used to be in their 20's and 30's and 40's.  They were accumulating.  Jones is a very good firm for the average investor like this.  However, as all these people started retiring, I have found that Jones does not have a very good philosophy for the distribution or protection phase.  Not that they don't have any of the products or concepts, it's just that they don't communicate much of it very well to the field.  If you sift through our intranet, you can find some very good material on distribution.  But it's not taught as a discipline.  So many FA's are simply on their own.

Aug 24, 2010 9:42 am

[quote=B24]

bb5, I sort of agree with you.  But to be honest, most wirehouse firms are not much dfferent in terms of philosophy.

Here is Jones' problem: they were stuck for many years in a mode of catering to baby boomers.  Well, those boomers used to be in their 20's and 30's and 40's.  They were accumulating.  Jones is a very good firm for the average investor like this.  However, as all these people started retiring, I have found that Jones does not have a very good philosophy for the distribution or protection phase.  Not that they don't have any of the products or concepts, it's just that they don't communicate much of it very well to the field.  If you sift through our intranet, you can find some very good material on distribution.  But it's not taught as a discipline.  So many FA's are simply on their own.

[/quote]

Amen

Aug 24, 2010 3:09 pm

guys obviously the solution to this is: Go knock on more doors!

Aug 25, 2010 9:50 am

[quote=B24]

bb5, I sort of agree with you.  But to be honest, most wirehouse firms are not much dfferent in terms of philosophy.

Here is Jones' problem: they were stuck for many years in a mode of catering to baby boomers.  Well, those boomers used to be in their 20's and 30's and 40's.  They were accumulating.  Jones is a very good firm for the average investor like this.  However, as all these people started retiring, I have found that Jones does not have a very good philosophy for the distribution or protection phase.  Not that they don't have any of the products or concepts, it's just that they don't communicate much of it very well to the field.  If you sift through our intranet, you can find some very good material on distribution.  But it's not taught as a discipline.  So many FA's are simply on their own.

[/quote]

I disagree on a few points.  Ted built his personal book selling bonds to "old ladies" not baby boomers.  We have only recently gotten away from the smile and dial bond presentation.  My personal book is built on individual bonds sold to pre-retirees/retirees (granted that is where the baby boomer generation is currently).