EJ - GP & LP changes
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FWIW … in my entire region… not a single 5, a couple of fours and that’s it … since 2006. One three got a whiff from LPL, but he stayed with us.
In my old region, there are now 8 brokers with LPL that were with Jones. I believe of that 8, 6 were segment 3 and 2 were segment 4. I would expect Segment 3’s to go first then followed by Segments 4’s. I would say it is unlikely that Segment 5’s would ever move. I believe our total brokers in the region when I left was around 60-65. We did have some that went to Next financial also, I believe there were 3. Our region had some special issues with it so that transition rate may be higher than the norm.
The only people that ever leave our region are New, Seg 1, Seg 2, and rarely seg 3. We have not had a seg 4 or 5 leave in the 4 years I have been here. But we have a lot of complacent seg 4’s that are happy making 100-150K in second careers (many are in their late 50’s), and have no interest in leaving. Our seg 5’s are green machines - a few former RL’s (our region has been split/combined several times due to growth), they all have tons of LP, SLP and GP (current one). Our longest tenured FA must have close to $1mm in LP based on his years, production, and being a former RL. That’s kicked him an extra 200K or so each year. That’s a tough annuity to walk away from. And his business is mostly transactional, 1000+ households, can’t really take that with you. I think his business would get decimated if he left. Either that or it would be too much work to rebuild.
Some regions clearly have more turnover than others. My old region lost 4 Seg 4 brokers since 2006 and 2 Seg 5’s. The guy who took over my office left and I think he was Seg 3.
Brokers who produce expect bonuses and brokers who don't say it doesn't matter. If the firm is losing producing brokers, they had better do something to sustain them or the firm won't be able to maintain the growth that they had in the past. No one to pay for it and the GP's are not going to do it out of their pocket directly.We’re going to be, or at least should be, in a bonus bracket this trimester.
Remember Sir Spiffy, before there is bonuses, there is growth. According to your 10K which you claim to read cover to cover each quarter, FA growth is necessary for your firm. Are you guys growing or just maintaining head count these days. I know 3 years ago when I was there, it was 200 month new reps. And the headcount stayed about the same then...I believe you have 12K reps now, so obviously there is some net growth. BTW...Did you happen to notice that LPL advisors were noted as the most repected representatives by clients according to the JD Power survey which consistently names EDJ as the best firm... Apparently JD Power rates firm satisfaction and client satisfaction...Not bad for an independent firm.Until May of last year, only Seg 1-3 brokers left the region mainly from a lack of production. I laughed off the people who left because they honestly were a joke. I'd seen a million leave in my 11 years, so many that I quit learning their names. Most left before they were put on goals and fired. Few if any of these stayed in production after leaving.
When Seg 5's started leaving, of which I was one, then I began to take notice. It is a great firm, but depending on your specific situation there may be more profitable options. This is what led me down the path I took that led me to leave the only company I had worked for in my adult life.Because everyone is an individual. Each business is different. Each FA has their own unique circumstances. For some big producers, they could make almost as much with their deal at Jones (prodcution, bonus, profit sharing, LP/GP) compared to if they left. It also depends where you are in life. If you started at Jones at 22, and are seg 5 at age 35, there’s a good chance you are going to stay open minded. If you started at Jones at 45, and you are seg 5 at 55 or 60, chances are you are not leaving without a really good exit strategy and some serious energy. It also depends what got you to where you are. If you feel it is replicatable (word?) somewhere else, it’s easy to move. BUt as I stated earlier, our biggest producer has well over 1000 housholds, does stricly transactional business (about 25% MFDs, the rest indiv secur), has a boatload of LP and SLP (former RL), and does not have to work all that hard to gross 850K. He is in his mid 40’s. I can’t imagine trying to move a book like that. And he does not really believe in managed money very much, so he needs lots of clients. For him, staying put, doing Goodknights to shed unprofitable clients and have someone else pay his overhead and goose his profitability is probably worth more than the aggrevation of trying to move that entire operation.
[quote=BigCheese]We’re going to be, or at least should be, in a bonus bracket this trimester.
Remember Sir Spiffy, before there is bonuses, there is growth. According to your 10K which you claim to read cover to cover each quarter, FA growth is necessary for your firm. Are you guys growing or just maintaining head count these days. I know 3 years ago when I was there, it was 200 month new reps. And the headcount stayed about the same then...I believe you have 12K reps now, so obviously there is some net growth. BTW...Did you happen to notice that LPL advisors were noted as the most repected representatives by clients according to the JD Power survey which consistently names EDJ as the best firm... Apparently JD Power rates firm satisfaction and client satisfaction...Not bad for an independent firm.[/quote] Yes, we are growing headcount. We ended 2008 at 12,155 FAs globally. At the end of July we were at 12,659. 4.14% growth in a market like this. We ended 2007 at 11,202. 1457 advisors added in the midst of a major market meltdown, shrinking profits, and general fear of all things monetary. The goal for the year is 7%, I believe. Looks like we're at least close to being on track. Who said I read the 10-k cover to cover every quarter? I read it from time to time, but not necessarily cover to cover every quarter. You're pretty good at putting words in my mouth. I saw the JD Power ratings. Congrats. I've never said that you indy folks were bad or that you weren't good at customer service. You should be. A bunch of you cut your teeth at and learned about customer service from...drumroll please...Edward Jones! Question for the wiser than wise Mr. Big Cheese. If EDJ wants to grow market share, how do they go about doing it in a substantial way? In my zip code there are about $6.5B in TLIA out there for everyone to split. If Jones wants to bump their market share from 2% to 4% how do they do it? Funnel more marketing dollars to existing FA's? Not put in any new FAs until the existing ones reach critical mass? How would you suggest they do it differently than they are doing it right now? The funny thing about Jones that you seem to be overlooking, or at least not mentioning, is that 90% of the time there is growth AND there are bonuses. How many trimesters while you were at Jones were there no bonuses? Three? Four? How many of those no bonus trimesters were due to new FA growth vs the market? Zero? You can knock the growth at Jones all you want. The majority of the time it works well within the business model. Only in extreme times like this does it not look so good.[quote=Spaceman Spiff][quote=BigCheese]We’re going to be, or at least should be, in a bonus bracket this trimester.
Remember Sir Spiffy, before there is bonuses, there is growth. According to your 10K which you claim to read cover to cover each quarter, FA growth is necessary for your firm. Are you guys growing or just maintaining head count these days. I know 3 years ago when I was there, it was 200 month new reps. And the headcount stayed about the same then...I believe you have 12K reps now, so obviously there is some net growth. BTW...Did you happen to notice that LPL advisors were noted as the most repected representatives by clients according to the JD Power survey which consistently names EDJ as the best firm... Apparently JD Power rates firm satisfaction and client satisfaction...Not bad for an independent firm.[/quote] Yes, we are growing headcount. We ended 2008 at 12,155 FAs globally. At the end of July we were at 12,659. 4.14% growth in a market like this. We ended 2007 at 11,202. 1457 advisors added in the midst of a major market meltdown, shrinking profits, and general fear of all things monetary. The goal for the year is 7%, I believe. Looks like we're at least close to being on track. Who said I read the 10-k cover to cover every quarter? I read it from time to time, but not necessarily cover to cover every quarter. You're pretty good at putting words in my mouth. I saw the JD Power ratings. Congrats. I've never said that you indy folks were bad or that you weren't good at customer service. You should be. A bunch of you cut your teeth at and learned about customer service from...drumroll please...Edward Jones! Question for the wiser than wise Mr. Big Cheese. If EDJ wants to grow market share, how do they go about doing it in a substantial way? In my zip code there are about $6.5B in TLIA out there for everyone to split. If Jones wants to bump their market share from 2% to 4% how do they do it? Funnel more marketing dollars to existing FA's? Not put in any new FAs until the existing ones reach critical mass? How would you suggest they do it differently than they are doing it right now? The funny thing about Jones that you seem to be overlooking, or at least not mentioning, is that 90% of the time there is growth AND there are bonuses. How many trimesters while you were at Jones were there no bonuses? Three? Four? How many of those no bonus trimesters were due to new FA growth vs the market? Zero? You can knock the growth at Jones all you want. The majority of the time it works well within the business model. Only in extreme times like this does it not look so good. [/quote] very well put........Cheezy, I think Jones is actually addressing some of those issues (other than the CD/UK thing). Yes, we do not offer a real competitive transfer package, but it is FAR better than it ever was. If I am not mistaken, it can approach 100% of T-12.
They are aggressivly extending Goodknight and Partner Plans. For the life of me, I still don't understand their reluctance to even have 2 or 3 person offices. I have never gotton a good answer on that. And it's nothing stupid like "one of the GP'S wives sells the prints that we hang in our offices". It's something fundamental, but I just can't figure it out. Unless they have proved over the years that it doesn't work (for their model), the only thing I can think of is the challenge they would have trying to manage teams. Maybe they are afraid of "team" exodus, I don't know. But overall, I think they are working to avoid the "scratch start". People always say they "love turnover". Throw em all against a wall and see what sticks. I don't believe that. I think they would much rather have 1000 - 1500 newbies make it every year, and be done with FA headcount growth in 5 years. They could disband the huge development and recruiting departments and focus on growing their advisors assets. One final thought...Jones is never going to have tons of huge producers. They don't market to the UHNW or even the HNW crowd. We appeal to "Joe Sixpack" for the most part. You can have a guy in every town in America service 400-500 clients and an average HH of $100K. Based on our model, that can work. You can't have 5-10 guys working in one town, servicing people across the entire county in our model. It defeats the purpose of having the "local guy". However, I think it could work in some urban markets, like STL. Not sure why you need 10 offices on every block. I'm done.Two things.
First, I thought it would only be a matter of time before an indy touted the JD Power at LPL. Spiff, kudos to you for not rubbing it in their face that people have bashed JD Power when Jones was winning everything. However, I will. You can’t bash EDJ for JD Power rankings and then try to claim it is some huge deal when LPL wins something.
Second, the TLIA statistics are incredibly flawed. In my area alone, you are talking $6.8 billion. Most is tied up in 401ks. They are counting those as investable assets, as well as banking deposits and often money that is generated by businesses in the form of loans (Factoring, etc.). The TLIA statistics are crap. A Jones office on every corner is not smart business.
B24 - I thought Jones one time tried 2 to 3 person offices and it didn’t work.
That is the model I’m going with. Seems to be working so far. I think if you have strong leadership, it can work.
Personally, I think EDJ will be fine and Weddle appears smarter to me now than he was when I was there. I think eventually he will be an unpopular MP, but will do what’s best for the future of the firm.
Yeah, I think years ago they tried it, and there are still some legacy multi-FA offices. Not sure why it didn’t work, but who knows, maybe Weddle will tackle that too. But he seems pretty adamantly opposed to it.
Yes, TLIA is flawed on one hand, but on the other hand, it is useful for relative measures. For example, one area has 3.0B, another has 10.0B - it doesn't mean you have an opportunity at capturing $10B, it just means that location "B" is much richer in assets than "A". I would argue that much of that 401K money indicates potential money in motion at some point. What do you mean by Weddle will eventually be unpopular? I'm not arguing your thoughts - just curious what makes you think this. I have always felt the exact opposite.[quote=B24] Yeah, I think years ago they tried it, and there are still some legacy multi-FA offices. Not sure why it didn’t work, but who knows, maybe Weddle will tackle that too. But he seems pretty adamantly opposed to it.
Yes, TLIA is flawed on one hand, but on the other hand, it is useful for relative measures. For example, one area has 3.0B, another has 10.0B - it doesn’t mean you have an opportunity at capturing $10B, it just means that location “B” is much richer in assets than “A”. I would argue that much of that 401K money indicates potential money in motion at some point.
What do you mean by Weddle will eventually be unpopular? I’m not arguing your thoughts - just curious what makes you think this. I have always felt the exact opposite. [/quote]
Your thoughts on TLIA are true. The problem is that Jones uses those numbers to determine HOW many FA’s they can put on a street. You are correct that it might be a better idea to have an office in an area that says 10b instead of 3b, but I think attempting to place ten (real case here) FAs on a SINGLE street that also has a Merrill office, an SB office and quite a few banks may be the wrong thing.
As for the argument that 401k money could be money in motion - this is true. But in my area, it seems that the companies here advise people they hire to roll their 401k into their new 401k before their advisor ever finds out about it (you could make the argument that if I talked to my clients more often that I would KNOW that they are going to take a new job, but sometimes clients don’t tell you stuff). The problem is timing, especially with prospects. Are you going to know when a prospect is moving jobs? Is their other advisor all over it? Who knows?
Weddle will be unpopular to some of the old vets who have been around FOREVER, I think. ytrewq and edjgp may disagree. I think that if he had his way, Weddle (not to be confused with WeddleMe) would have Jones with all kinds of really cool things. Update the GP/LP system so that more is invested in Growth and Health of the advisors. Put individual securities in a wrap program managed by the Advisory Solutions committee. I think he gets a lot of pushback and is attempting to do things that will help the firm adapt to the 21st century.
But then again, I’ve been gone a while now, and his popularity may be soaring. Quite a few good things have come about.
Oddly, this is exactly the demographics of my location. I have 6 guys in a relatively small town, outside a Top 20 demographic area. I market my business across five counties effectively (ok, relatively effectively. If it was effective, I'm be grossing 25K right now), in some cases to people where there is an EJ office 300 yards from their home. All I'm saying is the map changes so much across this country, no one model answers it all.… You can’t have 5-10 guys working in one town, servicing people across the entire county in our model. It defeats the purpose of having the "local guy…
I actually agree with foot that there are some things that we can do to make the firm more profitable, but it would change the dynamics of the culture. Two or three person offices come to mind. GKN and Legacy offices are popular and being utilized a lot these days, but they’re temporary. They aren’t designed to be a long term cohabitation. Is it cheaper? Yep. But what happens to a Legacy FA’s assets if he leaves the firm? Same thing with a GKN. What about if I’m sharing an office with my buddy across the street and he decides to leave Jones or the biz altogether?
Do you share BOAs? What if you have a $500K producer in with a $150K producer. Who's P&L statement does the BOA hit? Do they split it by AUM, production, or actual usage. Do you have a BOA for each office? That would be confusing to a new client coming in for the first time. As for growing market share - nobody said that Jones is only trying to do it through growth. But, they realize that a region full of Seg 4 and 5 FAs isn't going to bring in as many assets as a region full of new FAs. Once a Seg 4 FA reaches $50-60MM AUM, he's not going to be out working as hard as he was before to bring on new assets. He's going to be wondering how he can do as little work as possible and still make the money he wants. He knows that through market growth and stuff that happens naturally like rollovers his book is going to continue to grow and eventually be where he wants it to be. He's going to stop reaching out to new clients. In essence he'll get complacent about growing his assets. So, you'll eventually cap out on the market share that a group of FAs will bring in. Sure, you'll have some that go on to get to $100-150MM, but when you're talking about Billions of dollars (even if the TLIA numbers are wrong) out there to get, $50MM isn't a significant percentage. Transfer brokers - this is an area where I agree with you. Jones has become more competitive, but not enough. Our region has a push to recruit more transfer brokers. You bring on market share instantly with a transfer, but you don't affect the new FAs who are doorknocking. There are absolutely some things that Jones could do to make itself more profitable. But they would do it at the cost of the culture. Ironically, it's the culture that keeps a lot of the old Vets here. Those are the ones you're suggesting will leave if the bonuses don't return. So, what do you do? I DON'T think screwing with the LP and GP is a great idea. That would potentially piss off not just the Vets, but the small potatoes guys like me, and the HQ people who are partners too. And can you imagine the outrage if it people figured out that the only reason they were doing it was to make sure the big producers are getting their bonuses? I'd hate to be Weddle's secretary that day. I think Weddle will continue to make changes. I think he'll try to sell those changes to the Vets as best he can. Some of them will buy in, some won't. I think that time will show that he was doing a good thing for the firm by making us more competitive with the other brokerage firms. It may change the culture some. Hopefully for the better.I know of at least one office on the East Coast that housed a husband/wife and prior it was a mother/daughter office (mom retired). They seem to be doing quite fine.
I keep scratching my head why Jones management feel one person offices are the ONLY model that works. 1 full-time assistant 25-35K, benefits5-7K, rent 12-18K or more, on and on. Newbies aren't profitable (or at least until year 3 years) Canada and the UK have never been profitable, is anybody wondering what's going on? Maybe Spiff and B24 can shed some light. I use excel and it just doesn't compute...Oddly, this is exactly the demographics of my location. I have 6 guys in a relatively small town, outside a Top 20 demographic area. I market my business across five counties effectively (ok, relatively effectively. If it was effective, I'm be grossing 25K right now), in some cases to people where there is an EJ office 300 yards from their home. All I'm saying is the map changes so much across this country, no one model answers it all. [/quote] Yeah, I hear you. I'm not saying it can't or doesn't work. I'm saying Jones would have to change its entire model to make it work correctly. The doorknocking thing, the "local guy" thing, the one-man office, the silent "territory" thing, all of it. I think they believe that one of their only competitive edges in the middle-market space is their office structure. In a rather commoditized industry, they are simply trying to utilize what little differentiating factor they have. I'm not saying it's right or wrong, but I think if we went down the other path, we are all of a sudden like every other brokerage firm (in the eyes of the public).[quote=B24]… You can’t have 5-10 guys working in one town, servicing people across the entire county in our model. It defeats the purpose of having the "local guy…