Edward Jones changes performance expecations

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Apr 26, 2010 9:08 am

Finally enough talk about it, this morning they rolled it out. Basically there is only the change that they extended the amount of time that your line is going straight up for another year and a half. To have the benefits that you had making 216K, you now have to do 264K. In the large realm of things I don't think these changes are a huge deal it is just another bad sign from Jones.

The thing I noticed the most was that while they took this opportunity to change the perfomance chart to get more, they did not correct some of the little problems that they currently have. They also refused to extend the amount of time it would take a new person to get to 216K, I am glad I didn't start my business in 07-10 as I think in reality this is the group that is going to be hammered by this decision and they should probably be the most fragile group we have in the industry in terms of what they have to go through to get more business.

Also does any other firm work on a 4 month rolling average. I believe the need to change to a 12 month is obvious.

Apr 26, 2010 10:22 am

It's about time.  I see too many veterans (10+ years) doing 15K and it just boggles my mind.  I think 22K for an established advisor is reasonable.  That's like $21-23mm in wrap business.  Or $35mm in A share trails plus $15K in transactions.  After 7-10 years, if you can't muster up that production, you really shouldn't be in business. 

The writing on the wall is that you need to do wrap business.  Obviously they are spinning it how they want, but that's their bottom line.  Even if you have just 10-15mm AUM in wrap business, you only need to do another $5-10K in transactions per month.  Between transactions, trails, maturing assets, new money, and automatic (DCA) business, I don't see how you CAN'T do an additional 5-10K.  There is simply no reason why someone can't hit these numbers if they have a good plan to get there.  I am only 4 years in, and I have $7K in revenue each month just walking in the door (wrap, trails, DCA, etc.).  So $10K is pretty much a given, without much of any work.  If I do some transactions, bring in one decent new client, and not much else, my month is at least 15-17K.  How tough is that to do?

Apr 26, 2010 10:26 am

Why is it a bad sign from Jones?  I keep hearing people say this, but I don't really understand why it is viewed as a negative sign.   Did you read the part of the announcement that said it has been 13 years since they changed the performance expectations?  If it was such a negative sign, why doesn't it take effect immediately?  The changes don't start until 2011 and aren't completed until 2012.  That give someone who might be struggling today the rest of 2010 to get it in gear and get their numbers up to where they probably ought to be anyway. 

What good does a 12 month rolling average do?  With a 4 month rolling average if you have a couple bad months in a short amount of time it shows up immediately.  It throws up a big red flag that says that you're struggling.  It allows for immediate help from the firm and your region.  But yet it's not so short a time that the firm and the region panic for no good reason.  How does a 12 month rolling average allow the firm to better judge who needs assitance and who doesn't? 

What are the little things that they need to change? 

Apr 26, 2010 11:39 am

13 years?  I thought they just bumped up min from $14-15k/mo to $18k within last 4 years or so.

Apr 26, 2010 12:00 pm

So they changed the meeting expectations line to 22K per month from 18K per month, correct? That by my math is the second time in the last 4 years that they changed the line. They moved it from 15K to 18K and now to 22K. I understand why they did it and it was probably time to do it. When you work for yourself you are always on a 1 month standard ...not a 4 month as an employee.

Apr 26, 2010 12:28 pm

[quote=Spaceman Spiff]

Why is it a bad sign from Jones?  I keep hearing people say this, but I don't really understand why it is viewed as a negative sign.   Did you read the part of the announcement that said it has been 13 years since they changed the performance expectations?  If it was such a negative sign, why doesn't it take effect immediately?  The changes don't start until 2011 and aren't completed until 2012.  That give someone who might be struggling today the rest of 2010 to get it in gear and get their numbers up to where they probably ought to be anyway. 

What good does a 12 month rolling average do?  With a 4 month rolling average if you have a couple bad months in a short amount of time it shows up immediately.  It throws up a big red flag that says that you're struggling.  It allows for immediate help from the firm and your region.  But yet it's not so short a time that the firm and the region panic for no good reason.  How does a 12 month rolling average allow the firm to better judge who needs assitance and who doesn't? 

What are the little things that they need to change? 

[/quote]

Spiff I have heard others say you drink the kool-aid but my lord you inability to discuss the situation in terms of reality is daunting.

A. It is a bad sign from Jones only if you are a financial advisor there. Why? It is a sign of things to come, more and more ... It is a sign that the company is not happy with their profits and is taking ANOTHER step towards squeezing your #!$#@$. If you weren't here for when the lowered the commission on equities or when they changed postage from being paid out of their 60 to being paid out of my 40. If you really look at the change in compensation over the last few years - every single thing is to get more $ to home office. Literally, remember that whole we are a partnership not a corp...  Listen spiff ... my point here is that it isn't about the gross amount changed it is about home office NEEDING more money from the field.

B. "If it was a negative sign why wait until the beginning of the year"? I seriously do not see at all what this has to do with the situation. Also it is already pointed out that they have in fact changed standards, very recently. In fact the only standard that continues to move is the amount necessary for profitablity, bonus, D-trip, etc. Not the "Exceeding" which actually means nothing more than a pat on the back after you are out 3 plus yrs.

C. The 4 month rolling average is not a good baromator. Not all. In fact don't you get tired of the hole yoyo effect? And how could you rationize how using a 4 month is a better guage than using a 12 month? That is just not common sense. Isn't everything guaged off of what we make in a calandar year?

D. Why I really think this is poor sign from Edward Jones is that there was nothing in here that would or will help the field at all. (BTW- Spiff I can't believe you actually said that your poor numbers give the region a way to help you out, have you ever gone below in your career?).

They did not update the problems with the chart already. Namely the GKN, new/new, open office performance levels that are completely ludicrous and unfair to certain types of starters.

They also did nothing to slow the rise of the chart. I personally don't care if you want to catch those people who stop working at year 5. However if Ejones really really doesn't believe that a new/new has a harder time starting a business in 07-10 than in 04-05, wow..... So if they had any other reason besides making them more money they would have fixed some of the small excisting problems with their performance chart, instead it appears like they spent 20 mintues on this entire project. Where is the deep thought, where is any benefit to me the financial advisor?

Apr 26, 2010 1:57 pm

A. I agree that this is about needing more money from the field.  That's where the company makes it's money.  And yes, the GPs make their money from that source too.  I've been at Jones long enough to remember the last change in production standards.  I also remember it being a decision back then about HQ needing more money from the field.  We had 2000 FAs back then and a correlating support staff.  Today we have 12,000 FAs and the correlating support staff.  The number of things we have more of today vs back then is tremendous.  The GPs still make roughly the same return.  More things mean more money is needed.  You can't honestly tell me that it costs the same to run the avg EDJ office in 2010 the same that it did in 1997.  I believe this is a function of the average branch just simply being more expensive to run and therefore to become profitable.  If what it takes is to raise the minimums, then that's just the way it has to be. 

B.  They could implement this right now and save a ton of money just on the div trips alone.  As it is, we have one trip cycle before the new rules go into effect.  They could say this starts right now and probably 1/3 of the people who just squeaked by this last go round wouldn't make it the next time.

I'm not sure about your P&L, but mine doesn't say anything at all about production standards being a part of the bonus system.  It's dependant upon the firm's profitability and my office profitability.  If you're concerned about meeting expectations, then bonuses aren't even on your radar.  So that's kind of a moot point. 

C.  The only thing that I'm aware of in our company that is based on our 12 month production is LP (every 3-4 years) and production awards (snapshot  in Dec to know which plaque to give you).  Bonuses are based on trimesters (4 months).  Segments are based on the 4 month rolling average.  That's about the only things that production really affects.   

I don't really think it matters that much what barometer they use.  Certainly a 6 or 12 month rolling average would be smoother than a 4.  But that means that problems are as easily spotted as they would be with a shorter average.  I have been below expectations in my career.  I've also had some monster months.  Those monster months have a tendancy to mask your poor performance.  Even in the 4 month cycle you could have a $40K month followed by three $10K months and you'd still be meeting expectations for 4 whole months.  Nobody is going to notice that.  At least at the end of that 4th month you hit the radar screen and possibly get some help from your region.  It's not a perfect system either, but I think it's a nice middle ground approach between month to month numbers and 12 months numbers. 

D. I don't think it makes sense to create a bunch of different production charts for all the different scenarios that FAs find themselves in.  Obviously a guy who just took over a $40 mil book is going to have an easier time of it than a new/new.  That's just the luck of the draw.  Life isn't fair, get over it.  10 years down the road it won't really matter. 

Charts aren't supposed to be beneficial to the financial advisor.  The only thing I get from my chart is a good feeling or a bad feeling depending on where my dot it.  That's it.  They're a yardstick we use to see how we're doing compared to what the firm wants.  Charts are indifferent to your success or failure.  So, if you thought that Jones was going to fix your personal production issues by coming up with a new production chart, then you need some psychiatric help. 

Charts are also indifferent to market conditions.  We're expected to sell enough of something to get our little dot at a certain spot on the chart.  Jones, the company, however is not indifferent to market conditions.  Surely in your region you've got one or two folks that got to work with Jones longer than they should have in 2008 and 2009.  That's because Jones fudged their rules with the charts because of market conditions.  The chart still said you were below expectations.  Jones let you keep your job and try to make your chart look better.   

I'd like to see the charts change more often.  Changing once every ten years isn't great.  If two years from now inflation is running rampant and it costs more money to run a Jones office, it makes sense to me for Jones to calculate average profitability for an office and adjust the chart up according.  It might be a small 1-2% jump, but that would be easier to swallow than a 22% jump over two years.     

Apr 26, 2010 1:57 pm

A 4-month average seems like a reasonable metric for someone in their first 3 to 5 years maybe, but after that it just seems like a way to encourage transactional business.

Lower targets for new people tend to give you time to develop the business the right way, but eventually you need higher standards for the reasons described above.  But, like the wirehouses, it is hard to make any money while you are building your recurring revenue stream....and measuring someone on 4-month periods is counter to building long-term recurring revenue (for new FAs).

EJ is not the only firm that has those competing incentives--in fact, they are the last to adopt compensation policies to accentuate it.

Apr 26, 2010 2:28 pm

spiff- good commentary

However there is some pretty tough stuff in this law change. If you EVER in your CAREER have your 4 month drop below 22K. You get put on goals, if you get put on goals 3 times in your career, they now have the legal side of things set up to take your office. Also once on goals you have 4 mnths to get the target or you are FIRED.

I am just shocked at the concept of this. Again I have no problem with the seg 3 out 10 yrs doing 15s. But this change shakes us at the core for the people out between 3-5 yrs, and 15 plus.  I have a problem when your kid is seriously ill, your mom or dad dies, your spouse is sick, etc. I have a huge problem that now we will always have to watch our back for 1 bad month.  With this change, I believe it crazy to keep this measurement on a four month instead of a 12. I mean spiff there goes the idea of traveling to the West Coast for 3 weeks or doing anything that would take you out of the office for a long period of time.  Also to become excempt you need to qualify for the FMLA, and that takes a serious situation with YOU and a Dr. Not you mother, brother, wife, kid, etc.

If anyone says anything about us being a family at summer regionals, I think my Ejones career will be over.

Apr 26, 2010 2:55 pm

how do you guys get any work done while posting all this pointless banter?

Apr 26, 2010 3:01 pm
Joined: 10/22/2009 Posts: 221 I guess your post is supposed to be ironic??
Apr 26, 2010 3:03 pm

I agree that it seems harsh.  But how many times have we heard people, inside and outside of Jones, complain that Jones let's people hang on too long?  Now you're complaining when they say they're going to make it a little tougher? 

We're still talking about a 4 month rolling average here.  I didn't read that you needed to qualify for FMLA in order to be exempt.  If your kid gets diagnosed with Leukemia (happened to an FA here in STL) or your wife becomes seriously ill I'd bet you could talk to your RL and your area leader and they could work something out.  Parents dying shouldn't take you out of the biz for 4 months.  Shouldn't even take you out for 4 weeks.  Who travels to the West Coast for 3 weeks?  How many FAs do you know that leave their offices for a long period of time?  FYI, get your office profitable on a 12 month rolling basis (they threw you a bone) and you're exempt.  This whole thing become a non-issue.   

You're talking about a really small group of people that this might affect.  Most folks who are on the bubble are going to just turn the heat up a little and keep on moving forward.  That's what they did last time.  So instead of having a bunch of guys hanging out at the $22K mark, you'll have a bunch of guys hanging out at the $24K mark.  They'll stay above whatever figure it is and just keep dialing.  It will have the desired affect of Jones pulling in more more money, but not payout out big bonuses.  Just like now. 

Apr 26, 2010 3:09 pm

daily journal with quick updates at the end of the business day

not equal to

A. I agree that this is about needing more money from the field.  That's where the company makes it's money.  And yes, the GPs make their money from that source too.  I've been at Jones long enough to remember the last change in production standards.  I also remember it being a decision back then about HQ needing more money from the field.  We had 2000 FAs back then and a correlating support staff.  Today we have 12,000 FAs and the correlating support staff.  The number of things we have more of today vs back then is tremendous.  The GPs still make roughly the same return.  More things mean more money is needed.  You can't honestly tell me that it costs the same to run the avg EDJ office in 2010 the same that it did in 1997.  I believe this is a function of the average branch just simply being more expensive to run and therefore to become profitable.  If what it takes is to raise the minimums, then that's just the way it has to be. 

B.  They could implement this right now and save a ton of money just on the div trips alone.  As it is, we have one trip cycle before the new rules go into effect.  They could say this starts right now and probably 1/3 of the people who just squeaked by this last go round wouldn't make it the next time.

I'm not sure about your P&L, but mine doesn't say anything at all about production standards being a part of the bonus system.  It's dependant upon the firm's profitability and my office profitability.  If you're concerned about meeting expectations, then bonuses aren't even on your radar.  So that's kind of a moot point. 

C.  The only thing that I'm aware of in our company that is based on our 12 month production is LP (every 3-4 years) and production awards (snapshot  in Dec to know which plaque to give you).  Bonuses are based on trimesters (4 months).  Segments are based on the 4 month rolling average.  That's about the only things that production really affects.   

I don't really think it matters that much what barometer they use.  Certainly a 6 or 12 month rolling average would be smoother than a 4.  But that means that problems are as easily spotted as they would be with a shorter average.  I have been below expectations in my career.  I've also had some monster months.  Those monster months have a tendancy to mask your poor performance.  Even in the 4 month cycle you could have a $40K month followed by three $10K months and you'd still be meeting expectations for 4 whole months.  Nobody is going to notice that.  At least at the end of that 4th month you hit the radar screen and possibly get some help from your region.  It's not a perfect system either, but I think it's a nice middle ground approach between month to month numbers and 12 months numbers. 

D. I don't think it makes sense to create a bunch of different production charts for all the different scenarios that FAs find themselves in.  Obviously a guy who just took over a $40 mil book is going to have an easier time of it than a new/new.  That's just the luck of the draw.  Life isn't fair, get over it.  10 years down the road it won't really matter. 

Charts aren't supposed to be beneficial to the financial advisor.  The only thing I get from my chart is a good feeling or a bad feeling depending on where my dot it.  That's it.  They're a yardstick we use to see how we're doing compared to what the firm wants.  Charts are indifferent to your success or failure.  So, if you thought that Jones was going to fix your personal production issues by coming up with a new production chart, then you need some psychiatric help. 

Charts are also indifferent to market conditions.  We're expected to sell enough of something to get our little dot at a certain spot on the chart.  Jones, the company, however is not indifferent to market conditions.  Surely in your region you've got one or two folks that got to work with Jones longer than they should have in 2008 and 2009.  That's because Jones fudged their rules with the charts because of market conditions.  The chart still said you were below expectations.  Jones let you keep your job and try to make your chart look better.   

I'd like to see the charts change more often.  Changing once every ten years isn't great.  If two years from now inflation is running rampant and it costs more money to run a Jones office, it makes sense to me for Jones to calculate average profitability for an office and adjust the chart up according.  It might be a small 1-2% jump, but that would be easier to swallow than a 22% jump over two years.     

Apr 26, 2010 3:52 pm

I guess one of the side benefits of being independent is that I don't have everyone in my region knowing what I grossed last month. In my old region at EJ, there was one guy who wasn't on the leadership team who charted everyone's gross every month and would call you to tell you what you grossed last month. I am sure that most every region has a guy like that. He ended up becoming a wholesaler, shocking huh?

When you are an employee you have to depend on the employer being sympathetic to your situation to bend the rule. It is just better not to have to depend on that sympathy and control your own destiny. I think the desired effect may happen but also an unintended result may happen as well.

Apr 26, 2010 4:06 pm

ghgr - I type really fast. 

noggin - that's true.  I'm sure we're going to have some guys jump from Jones to indy.  Especially once the new standards kick in.  We've got a lot of Seg 3 guys who are very happy producing $22-$25K a month, never hitting Seg 4 who may feel pressured by Jones to raise their production.  My guess is they'll either embrace Advisory Solutions, or go somewhere where they don't feel pressured to do anything besides show up.  Like you, evidently. 

Apr 26, 2010 5:25 pm

Wow, this thread got pretty heavy....

Few observations:

1. I think the purpose behind this is to really impact the true "slackers", not the guys that are on a slow, upward trajectory.

2. This will now force people to plan and have some real purpose behind their business, not just come to work and, erhh, post nonsene on forums all day.  With some real business planning, the goals are very achievable, and they now give you MORE time early in your career to hit them.

3. I truly believe Jones MUST place more focus on business development training.  They have done a good job of training the troops to sell and open new accounts, but as I look around my region, I see a lot of guys out 10-15 years, and you KNOW that their busines looks something like this:

Can-sell-date 1998, $60mm AUM, 700 households, mostly A share funds, bonds and a smattering of stocks/annuities/CD's.  They get $8,000 in trails, plus another few grand in DCA and maturing bonds.  They come to work at 10:00, leave at 4:00, and don't do much in between other than answer a few calls.  So they call a few clients, sell a few bonds, a few stocks, maybe get a rollover or referral here and there.  So most months, they are doing $20-25K just by the seat of their pants, without much of a real plan.

Jones built this, now they must deal with it.  These people did as they were told, now they are burnt out, and not producing a whole lot.  Jones needs to do a better job of telling people to annuitize some business or how to otherwise get clients to pay for their services and advice.  Instead they tip-toe around the elehpant in the room (namely, "how the fukc do I do that much gross when I have no assets that produce any revenue and all my clients are retired?") and masquerade this whole thing as "we are finding new ways to better serve our clients and provide world-class service, blah, blah, blah".  Just come out and fukcing say it !  You need to annuitize your business!  Stop with the back-room winks from veterans and outline a plan, in writing, to help the veterans that YOU created generate more income.

I think Jones did the right thing, I just think they owe it to their veterans to give them a better track to run on.

Apr 26, 2010 9:01 pm

[quote=B24]

Wow, this thread got pretty heavy....

Few observations:

1. I think the purpose behind this is to really impact the true "slackers", not the guys that are on a slow, upward trajectory.

2. This will now force people to plan and have some real purpose behind their business, not just come to work and, erhh, post nonsene on forums all day.  With some real business planning, the goals are very achievable, and they now give you MORE time early in your career to hit them.

3. I truly believe Jones MUST place more focus on business development training.  They have done a good job of training the troops to sell and open new accounts, but as I look around my region, I see a lot of guys out 10-15 years, and you KNOW that their busines looks something like this:

Can-sell-date 1998, $60mm AUM, 700 households, mostly A share funds, bonds and a smattering of stocks/annuities/CD's.  They get $8,000 in trails, plus another few grand in DCA and maturing bonds.  They come to work at 10:00, leave at 4:00, and don't do much in between other than answer a few calls.  So they call a few clients, sell a few bonds, a few stocks, maybe get a rollover or referral here and there.  So most months, they are doing $20-25K just by the seat of their pants, without much of a real plan.

Jones built this, now they must deal with it.  These people did as they were told, now they are burnt out, and not producing a whole lot.  Jones needs to do a better job of telling people to annuitize some business or how to otherwise get clients to pay for their services and advice.  Instead they tip-toe around the elehpant in the room (namely, "how the fukc do I do that much gross when I have no assets that produce any revenue and all my clients are retired?") and masquerade this whole thing as "we are finding new ways to better serve our clients and provide world-class service, blah, blah, blah".  Just come out and fukcing say it !  You need to annuitize your business!  Stop with the back-room winks from veterans and outline a plan, in writing, to help the veterans that YOU created generate more income.

I think Jones did the right thing, I just think they owe it to their veterans to give them a better track to run on.

[/quote]

I bet Ayatollah Bachmann has been eating crow breakfast, lunch, and dinner since Weddle came along

Apr 26, 2010 9:12 pm

[quote=Spaceman Spiff]

ghgr - I type really fast. 

noggin - that's true.  I'm sure we're going to have some guys jump from Jones to indy.  Especially once the new standards kick in.  We've got a lot of Seg 3 guys who are very happy producing $22-$25K a month, never hitting Seg 4 who may feel pressured by Jones to raise their production.  My guess is they'll either embrace Advisory Solutions, or go somewhere where they don't feel pressured to do anything besides show up.  Like you, evidently. 

[/quote]

Good one Spiff. After you have built a business why shouldn't you have say 200 HH at an average of 200K that gives you 40 Mill AUM. Say you average 80 BPS on that so you have 320,000 gross. That sounds about ideal to me. As an Indy when I get to that level I will make over 200K on that business. I personally don't need a RL or a development leader to get me going, my motivation is from the inside.

BTW, that seg 3 guy and what he was producing are right at what i was doing at Jones. I guess I made the right decison to leave when I did.

Apr 27, 2010 9:05 am

Certainly we all agree that giving it a little harder to some of these "vets" is a good thing for the firm.

Spiff - I myself have dealt with excempt and yes it now has to be you with the medical issue to qualify. And you have to miss 3 consecutive weeks at work to qualify as well. My real issue is that I hate having them dictate so strictly on this 4 month target. Basically the new rule is make at the very least 88K gross every 4 months or you will be fired.

I don't know where you are in your business but the scary part is that I saw those numbers drop in 08/beginning 09 and I can't believe that I am still hanging their sign sometimes due to the idea that they have the right to replace me if that situation presents itself again.

B24 - Great post. Agree wholeheartingly. However I have to point at that there is not more time granted to reach the same levels ... still like 4.5 yrs to 18K and then 6.3 yrs now to 22K. Whereas before it just ended at 18K. I actually got pissed when they acted like they were "giving" people more time.

Me currently, I figuered out that I NEEDED to annuitize my business about 3.5 yrs out but I am still in that transition, my concern is now I really really have to balance those two b/c at Ejones if you built that 60 mil book on A shares you are going to be in trouble although you got your little awards all the way up... Last thing is that I believe for me this is another set back in trying to be better at what I actually do (giving financial advice) this is just more time that I have to be on the phones/ hittin the doors instead of looking at duration and standard deviation for my 400 clients.

Apr 27, 2010 9:14 am

RW,

I guess I am confused about your identity.  I thought you left Jones several years ago.  I must have you confused with someone else.  Did you formerly post under a different name?