New Jones Minimum Production Levels Coming?

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Mar 30, 2010 8:06 pm

Weddle has hinted that the minimums need to be increased--this is in the middle of a recession--in order to boost profitability.  How high are they going? From 18k to 21k?

Mar 31, 2010 11:10 am

I am very suprised it has taken this long given their business model!

Mar 31, 2010 12:11 pm

22k - Heard from my Regional Leader yesterday

Mar 31, 2010 12:13 pm

Also there will no longer be "meeting" expectations. You will now either be "exceeding" or "below" expectations. 1 red line and you've got to be above it.

Mar 31, 2010 12:23 pm

That is interesting!!  That means old world Seg 4 Advisor would need to have a 4 month average of 8400 and that will go to 21k to stay off goals?  I must be misunderstanding....

Mar 31, 2010 12:58 pm

I'm not sure how the segment expectations will work. I do know that currently, production standards level off at $18k/month and that will go to $22k/month.

With the old production standards, Segment 2 is $8k, Segment 3 is $15k, Segment 4 is $27k, Segment 5 is $40k.

The problem Weddle sees is that people were stagnating at Segment 3, and in some cases, those branches still were not profitable. If they're going to stagnate, it must be at $22k/month now rather than $18k.

The levelling off occurs at Year 5 which was $18k. It will now be $22k. They're simply raising that red line, and throughout your first 5 years, your production standards have been based on the steady increasing slope of the line up to $18k. Regardless of Segments, everyone's production standards will go up during their first 5 years due to an increased slope from 0 up to $22k.

Mar 31, 2010 12:55 pm

You are misunderstanding.  Where did you come up with the $8400 number? 

Goals has nothing to do with your segment.  It has to do with what percentage of standard you are.  And that has to do with your tenure in the biz.  For me standard is $27k a month.  If I get to down a $10,800 4 month rolling average (40% of standard), then I go on goals.  40% is the magic number.  Once you hit that mark you hit all the wrong radar screens. 

We basically have one line on our chart right now.  You are either meeting or not meeting.  You get nothing special for exceeding other than a pat on the back from your RL once in a while.  If you are above the meeting line you can still go on div trips and due diligence trips, but you might not be up to your standard.  If you're not meeting, then not only do  you not get to go on the trips, but you also start to get hassled from the home office folks to get your numbers up. 

The raising of the expectations bar is simply inflationary.  It costs more to run an EDJ office today than it did in 1995 or 1985.  So, they're raising expectations to get more profit from the branches.  You know what's going to happen with this deal?  Jones is going to be more profitable.  Because there are a ton of Seg 4 offices out there right now that are skating along at $19-20K a month.  They're not getting any pressure from anyone to actually do Seg 4 numbers.  Those folks were skating along at $16-17K gross a few years ago when the minimum was at $15K.  Those folks figured out a way to get up to that $18-19K figure to keep themselves in good graces with Jones.   Now, they're going to have to work just a little bit harder.  And they'll settle in at $23-25K gross in a year or so.  But Jones will be more profitable in the end for it.  Which makes my LP happy.   

It shouldn't affect anyone other than that group of people who may be coasting right above the red line right now.  Now, it may affect the number of FAs we have going on Div Trips for the two cycles or so after they raise the bar.  But that will be temporary also.   

Mar 31, 2010 1:01 pm

To add to what Spiff said, don't think of Segments as standards. They are simply merit badges. Your expectations come from 1 thing: commission. It's all about the numbers. If you hit your numbers, you'll progress through the segments.

Mar 31, 2010 1:34 pm

[quote=Spaceman Spiff]

You are misunderstanding.  Where did you come up with the $8400 number? 

Goals has nothing to do with your segment.  It has to do with what percentage of standard you are.  And that has to do with your tenure in the biz.  For me standard is $27k a month.  If I get to down a $10,800 4 month rolling average (40% of standard), then I go on goals.  40% is the magic number.  Once you hit that mark you hit all the wrong radar screens. 

We basically have one line on our chart right now.  You are either meeting or not meeting.  You get nothing special for exceeding other than a pat on the back from your RL once in a while.  If you are above the meeting line you can still go on div trips and due diligence trips, but you might not be up to your standard.  If you're not meeting, then not only do  you not get to go on the trips, but you also start to get hassled from the home office folks to get your numbers up. 

The raising of the expectations bar is simply inflationary.  It costs more to run an EDJ office today than it did in 1995 or 1985.  So, they're raising expectations to get more profit from the branches.  You know what's going to happen with this deal?  Jones is going to be more profitable.  Because there are a ton of Seg 4 offices out there right now that are skating along at $19-20K a month.  They're not getting any pressure from anyone to actually do Seg 4 numbers.  Those folks were skating along at $16-17K gross a few years ago when the minimum was at $15K.  Those folks figured out a way to get up to that $18-19K figure to keep themselves in good graces with Jones.   Now, they're going to have to work just a little bit harder.  And they'll settle in at $23-25K gross in a year or so.  But Jones will be more profitable in the end for it.  Which makes my LP happy.   

It shouldn't affect anyone other than that group of people who may be coasting right above the red line right now.  Now, it may affect the number of FAs we have going on Div Trips for the two cycles or so after they raise the bar.  But that will be temporary also.   

[/quote]

Spiff I totally disagree... I think those people will seriously consider leaving now... And now jones just gave up a $18K/month guarantee for a new guy in an industry that has a probably close to a 15% success rate..

I also don't see the increase cost...technology cheaper(regardless of what they bill you), real estate(revolving) so that shouldn't be more, the only increase cost I see to edj is training and failing...

LPL has to be licking there chops...

One of my lpl osj friends has got numerous calls from the home office about leads they are getting from EDJ(this leaked out in my area last month)..

Mar 31, 2010 2:42 pm

You do run your own LPL office, right?  Your rent doesn't ever increase?  Your utility bills don't increase?  You don't ever give your assistant a raise?  Your health care premiums never go up? 

Must be nice to live in the perfect indy world of zero inflation. 

Evidently everything Jones ever changes around here results in a mass exodus.  Seems like everytime something changes someone gets on this forum and says "People are going to be leaving and going independant." 

Don't kid yourself into thinking the LPL people are licking their chops.  Now, will some of those people who can't figure out how to get from $20K a month to $23K a month ($3 mil in Advisory should do the trick), decide to leave?  Probably.  But I don't expect it will be a big deal.  More than likely what will happen is that they'll just up their production a bit to make sure their name stays off the spreadsheets at home office.  And to make sure they win the trips.   

Mar 31, 2010 2:48 pm

Oh yeah, as to the hiring costs, I've not seen any numbers that support your claim that our training costs have increased.  The volume of trainees hasn't increased, the failure rate hasn't increased, and the incremental training costs (HQ salaries, equipment, etc) have only gone up slightly.  In fact, there haven't been HQ salary increases in more than a year (stagflation).  So that's not  real valid argument either.  In fact, with the new push for every FA to start with some assets, and preferrably an office to work out of, the success rate has more than likely increased slightly.  Not enough to keep Jones from looking at the way we're growing and making some changes, but at least a small step in the right direction. 

Mar 31, 2010 6:28 pm

Looks like more reps will be heading to LPL!

I do not know if that is a good thing or bad.

Mar 31, 2010 7:10 pm

I don't think this will have much of an effect on how frequently people leave and go to LPL, or any other firm. I think the main effect will be that some FA's who are just coasting along, will now have to pickup their production a bit.

Mar 31, 2010 8:34 pm

Independent BDs like ours will pick up a good deal of brokers in the coming few years.  The Jones business model, and many others, were designed for the markets and enviornmnet of the 80s and 90s where ever increasing numbers of clients fed a dramatically advancing (and reasonably stable) equity market accompanied by ever lower intrest rates. 

The present and forseeable enviornment will witness further (we believe dramatic) shrinkage in both client base and numbers of industry professionals.  Naturally, this will mean lower incomes for those remainaing in the business, and for those who wish to maintain their lifestyle, independence is a great solution for those with the ability to run their own business.

Apr 1, 2010 2:34 am

The current minimum production level of $18k gross per month is not attainable in the current deep recession.  Makes you wonder why Edward Jones is considering increasing that minimum at this time.  With average daily production at $650 per day or $13K per month, raising the minimum production line is a  sign that the General Partners are out of answers.   This is what happens when a managment team becomes out of touch with the realities of their business model.   An increased minimum will do nothing for overall gross revenue for Edward Jones and may just have the opposite effect.  It would be interesting to know how many vets are investigating going independent at this time...my guess is that number would be far higher than anyone in St. Louis would suspect!  For what its worth, I am exploring all options at this time while the General Partners play with lines!

Apr 1, 2010 8:47 am

[quote=Spaceman Spiff]

You do run your own LPL office, right? Nope different b/d Your rent doesn't ever increase? Hasn't yet..  Your utility bills don't increase? Not terribly...  You don't ever give your assistant a raise?  Your health care premiums never go up?  Jones healthcare is a joke..  Also their premiums should be going down with the more younger people they add.

Must be nice to live in the perfect indy world of zero inflation.  I didn't say that.... But why replace a $18K producer with a newbie who has done nothing.."bird in the hand in better than two in the bush".. or something like that.

Evidently everything Jones ever changes around here results in a mass exodus.  Seems like everytime something changes someone gets on this forum and says "People are going to be leaving and going independant." 

Don't kid yourself into thinking the LPL people are licking their chops.  Now, will some of those people who can't figure out how to get from $20K a month to $23K a month ($3 mil in Advisory should do the trick), decide to leave?  Probably.  But I don't expect it will be a big deal.  More than likely what will happen is that they'll just up their production a bit to make sure their name stays off the spreadsheets at home office.  And to make sure they win the trips.   

[/quote]

Apr 1, 2010 8:50 am

[quote=AbovedaLine]

The current minimum production level of $18k gross per month is not attainable in the current deep recession.  Makes you wonder why Edward Jones is considering increasing that minimum at this time.  With average daily production at $650 per day or $13K per month, raising the minimum production line is a  sign that the General Partners are out of answers.   This is what happens when a managment team becomes out of touch with the realities of their business model.   An increased minimum will do nothing for overall gross revenue for Edward Jones and may just have the opposite effect.  It would be interesting to know how many vets are investigating going independent at this time...my guess is that number would be far higher than anyone in St. Louis would suspect!  For what its worth, I am exploring all options at this time while the General Partners play with lines!

[/quote]

I have also noticed that GP returns have decreased dramatically over the last 3 years.. Some of that you can blame on the market... but Weddle when from $10 Mil in GP to $3 Mil last year... That is a huge drop..

They need to look into the idea of a branch for rookies..

Apr 1, 2010 9:28 am

As usual, you guys are all WAY over-analyzing this.  They upped the minimums a few years ago....no "mass exodus".  It will not affect the guys consistently doing over 250K per year, which is at least half the advisors at the firm.  It will not affect the guys out 4 years or less (yet).  So it really only affects the longer-term FA's that can't actually produce more than 250K.  And truth be-told, if you can't do more than 250K, than a captive firm is not really economically feasible (too much overhead).  Honestly, being independant is probably the most logical thing for a lot of these 10- year, 225K producers.

There is also a bigger picture going on here.  Jones is migrating towards a fee-based environment (for many reasons).  If we kept standards at 18K per month (or 15K where they used to be), you could realistically have 20mm in AUM and still be above the line.  IMHO, it's not fair to the firm or to the other advisors in the area that could be prospecting in your area if you are going to just give up at $20mm. 

Apr 1, 2010 10:41 am

[quote=AbovedaLine]

The current minimum production level of $18k gross per month is not attainable in the current deep recession.  Makes you wonder why Edward Jones is considering increasing that minimum at this time.  With average daily production at $650 per day or $13K per month, raising the minimum production line is a  sign that the General Partners are out of answers.   This is what happens when a managment team becomes out of touch with the realities of their business model.   An increased minimum will do nothing for overall gross revenue for Edward Jones and may just have the opposite effect.  It would be interesting to know how many vets are investigating going independent at this time...my guess is that number would be far higher than anyone in St. Louis would suspect!  For what its worth, I am exploring all options at this time while the General Partners play with lines!

[/quote]

Ummm...it is in my branch.  As well as in all of the other branches in my region that have to hit that number, with the exception of 2 branches.  Just because YOU can't hit it, doesn't mean the rest of us can't.    

How long have you been with Jones?  Obviously not long enough to realize that Jones has done this from time to time in the past.  You evidently weren't around when it went from $15K to $18K.  I was.  I didn't see a mass exodus to indyworld. 

I think you are absolutely wrong with your comment about the GPs being out of answers.  If you'll listen, they're giving us the answers.  Advisory Solutions, FAST, MAP, new vendors on the annuity and insurance side of things, new relationships with places like Fidelity on the mutual fund front.  I could name a lot more.  All of that is designed to help you build your business so that you can hit that $18K a month figure.  Whether or not you choose to utilize them is completely up to you.  So, if you still think they're out of answers, perhaps you should start listening instead of talking. 

Good luck in your search through all of the options out there.   My LP thanks you for it. 

Apr 1, 2010 1:36 pm

"The current minimum production level of $18k gross per month is not attainable in the current deep recession.  "

So if you can't

I am 4 years out and hitting the minimums.  I just did a quick visual of our produciton screens.  33 FA's are over 20K in trailing 4 gross average (out of like 70 FA's).  Of the FA's that are under 20K, only 12 have more than 4 years with Jones. 

The depths of 2008 created some problems, but IMHO, our region appears to be performing better than pre-2008 levels.  We are a full year past that.  We have 7 FA's averaging over 40K per month.