The Edward Jones Advantage

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Sep 9, 2011 11:01 am

I'll admit, when I first left Jones I was pretty critical of the place.

But now that I have been Independent for a couple of years, I want to be fair and point out I am seeing some advantages to Jones.

Here they are:

1) Strong Brand Name - It's not yours, it's theirs, but it brings in clients and clients like it nonetheless. Also, you don't have to figure out how to create your own brand, which can be rewarding but is not easy to do.

2) Efficency - Edward Jones understands efficiency. Investment options, fee options, marketing, are all streamlined and prepackaged. You have a closed platform, but there is an advantage to this. The details of life are easier and you can concentrate on selling.

3) Walk ins - Because of the brand's retail presence and advertising, there are sometimes walk-ins and account transfers from other Jones offices. Something that won't happen as an Independent.

4) Sales focus - Jones does a good job of teaching you how to get out and sell. As an Independent, it is easier to get comfortable and not get out enough.

5) You are supported and watched. You feel like you are part of a team (even if that team will kick you to the curb at the drop of a hat). Sometimes, this support may not be so fun, it may be in the form of a threat. But as an Independent, you are on your own and on not on anyone's radar screen. This can be good because of lack of stress but also bad, in that one may lack direction.

Just some thoughts.

Sep 9, 2011 2:09 pm

Good stuff, thank you for sharing. 

Can you address the brand issue in more detail? 

Sep 9, 2011 2:25 pm

What aspect of the branding?

Sep 9, 2011 2:30 pm

Those are the advantages of all captive firms. I will agree, though, that Jones does a pretty decent job of taking care of all the backoffice stuff pretty efficiently for the advisors.

Sep 9, 2011 2:32 pm

What value do you think the branding presents?  Have many people snubbed their nose to your brand?  Has it taken more time to explain who you are and where the money is?  Did prospects warm up to the EDJ brand much quicker than yours?

Sep 10, 2011 9:12 am

The value of the brand at EJ is that it helps bring in clients. As I mentioned, clients may "walk in" or call in, after hearing that EJ has a good reputation. Also, I include under branding the possiblity of clients coming to you because they are moving to your area and are from another EJ office. Finally, there is the credibility in the clients' eye that comes with being with a major firm.

Have people snubbed their nose to my brand? No, not really. But I am with LPL, and I do not consider LPL to have much of a brand. When people research LPL, they see it is a credible company, and I find it as perhaps a slight negative over a wirehouse or EJ. When you get clients at LPL, they are coming with you almost 100% - not with the brand. You may say they are coming with you in spite of the brand, as there is almost none.

But an important point is the LPL brand is certainly not going to draw someone in for the first time. It is not a business builder in the way the Jones brand is.

Sep 9, 2011 3:25 pm

B24, do you have any second thoughts on having left Jones, having been out as an RIA for a while?

Sep 12, 2011 8:56 am

Getting Started in the Business:

At Jones, they invest about $150k in training and salary to help a new FA get started.

The policy now is to try to give new FAs a book of about $10 million. The chance, with the current attrition rate, of getting an office is there as well.

If we estimate the value of $10m in assets based on what it would cost to purchase a book that size as an Independent, it would be in the $100k range.

Therefore, EJ is putting about 250k into a new FA to get them started. Not a bad deal.

You could even say, given the level of investment, that performance monitoring and such is a fair tradeoff.

Sep 12, 2011 11:17 am

What new policy to give FA's a book of 10 million? I've never heard anything like that.

Sep 12, 2011 1:16 pm

I don't think it's official or in writing but I have heard it is the goal. Also, with the high turnover there is likely no shortage of open offices.

Sep 12, 2011 2:05 pm

[quote=American Flag]

B24, do you have any second thoughts on having left Jones, having been out as an RIA for a while?

[/quote]

Yeah, I think Jones helps with SOME clients. I definitely picked up a few here and there that walked in/called in because "their mother had Edward Jones, their sister had Edward Jones", etc. But it was all mostly word of mouth from existing clients - and I found mostly from other parts of the country. I found very little (if any) came from national advertising. There was almost always a human element.

However, I have found that I have picked up more large, quality clients as an RIA. For some reason, CPA's, attorneys, and many individuals perceive an RIA/indy advisor as more "neutral" or independent - as in being independent from the company message (read: "product pushing").

I also have far more freedom to market as a see fit, rather than the Jones marketing "bubble".

Bottom line, Jones has some advantages (or any wire I guess), but I have found many more advantages as an independent RIA.

Sep 12, 2011 2:08 pm

[quote=American Flag]

Getting Started in the Business:

At Jones, they invest about $150k in training and salary to help a new FA get started.

The policy now is to try to give new FAs a book of about $10 million. The chance, with the current attrition rate, of getting an office is there as well.

If we estimate the value of $10m in assets based on what it would cost to purchase a book that size as an Independent, it would be in the $100k range.

Therefore, EJ is putting about 250k into a new FA to get them started. Not a bad deal.

You could even say, given the level of investment, that performance monitoring and such is a fair tradeoff.

[/quote]

Yes and no. I don't think the true "investment" is nearly that large. First off, those are Jones' assets, so they are just taking them from one FA and giving them to another, so it's not an investment. Second, although they invest considerably getting an FA started, the 150K (if that's really the number) is after a few years, including office costs, BOA costs, etc. And by that time, if the FA fails, they keep the assets and move them to another FA, thus keeping the production going in perpetuity. So although from a pure accounting perspective, you might be right, but from a lifetime ROI, I bet it's usually positive for Jones.

Sep 12, 2011 3:38 pm

That 150k is a static number mostly derived from their overheard costs. Not true training costs. Those are much lower. Those flights, hotel rooms, fancy buildings, food, and general partners don't go uncounted in that $150k number. Jones primary sales training method, door knocking, is the same formula it has been for decades.

Here is what I see as the value of EDJ.

Brand - as stated above it probably makes a difference.
2.System - they teach you a system to prospect, they live that system. It's better than pressing your friends and family to buy insurance I'd bet. Back Office - You can just show up, sell, and the rest is taken care of for you. Even vacation planning.

You can replaces #1 if you went to Raymond James or Wells Fargo - and probably even #3 to some degree.

Sep 13, 2011 2:26 pm

I understand what you are saying about the 150k number, however, they do make an investment in the FA. This includes salary, training costs, and financing the business while it operates at a loss for the first several years. You won't get that from an Independent.

Regarding the assets given to a new FA, true they are Jones assets. But they still are given to the new FA to work, which is a boon for a new broker.

As an Independent, and former Jones FA, I am trying to balance out some of the criticism of Jones with the advantages. I am seeing these advantages with the benefit of hindsight. Those who are considering going independent should know both sides of the story.

Nov 4, 2011 3:05 pm

I understand what you are saying about the 150k number, however, they do make an investment in the FA. This includes salary, training costs, and financing the business while it operates at a loss for the first several years. You won't get that from an Independent.

That's why independents don't take on newbies that are green. They want seasoned reps who already have paid their dues at a wire or regional and gave up 65% of their comp for it. Your paying for all the perks you suggest.

Regarding the assets given to a new FA, true they are Jones assets. But they still are given to the new FA to work, which is a boon for a new broker.

These assets are always some reps C level clients that are part of a forced Goodknight program.Socialism at it's best, a firm making you give to the poor.

As an Independent, and former Jones FA, I am trying to balance out some of the criticism of Jones with the advantages. I am seeing these advantages with the benefit of hindsight. Those who are considering going independent should know both sides of the story.

Jones is a good place to start a career, but not the best to stay if you enjoy any sense of freedom and control. Not everyone has the DNA to be independent, some people need to be told what to do before they actually do it.
Nov 10, 2011 6:12 pm

@BULLY60: Don't know where you get the 65% number, but when you include the 40% payout, the milestone bonuses, the first year's salary, div trips (if you win one), and the subsidized health insurance you get a lot more than 40% payout. During your first three years you are given plenty of time to build your business with pretty low expectations. I took over two offices and in both cases I had A,B, and C clients. I kept most in the first office and all in the second (non-compete). So, your facts are skewed. As for being told what to do, I have yet to have a branch manager call me one time and tell me how to run my business. Compliance actually is on our side. Am I drinking the Kool Aide? No. I'm just telling the truth. Running down Jones to justify going independent is foolish because they are two seperate business concepts. If it makes you feel better to put EJ down to justify your current situation, that just tells me your current situation isn't so hot. But don't worry, Jones would take you back unless you really screwed them. Is going independent a good idea? Maybe for some. Maybe not for others. Either way, EJ is a great place to get your feet and who knows? you might actually like the culture and stick around for a while.

Nov 12, 2011 8:20 am

I think my wife said it best:

"You were constantly frustrated at Jones, which has now been replaced by the stress of going indie.  The stress will diminish where the frustation at Jones only grew.  You are already a much happier person and spouse."

I'm in my first six months as an Indie after more than a decade at Jones and couldn't be happier!