Weddle interview nov 2007

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Nov 2, 2007 6:00 am

#000000; FONT-FAMILY: Arial">#000000; FONT-FAMILY: Arial">Q. What’s your la<?: PREFIX = ST1 />#000000; FONT-FAMILY: Arial">test #000000; FONT-FAMILY: Arial">number of financial advisors? #000000; FONT-FAMILY: Arial">
#000000; FONT-FAMILY: Arial">There’s great news for our firm. We started this year with 10,288 financial advisors in our #000000; FONT-FAMILY: Arial">U.S. #000000; FONT-FAMILY: Arial">, Canadian and #000000; FONT-FAMILY: Arial">U.K. #000000; FONT-FAMILY: Arial">operations.


#000000; FONT-FAMILY: Arial">#000000; FONT-FAMILY: Arial">In 2006, we ended the year up 550. It was a decent year for us. It was not as much growth as we had hoped, but it was a good restart to our growth engine.


#000000; FONT-FAMILY: Arial">#000000; FONT-FAMILY: Arial">In 2007, through the end of September, we have a net increase of 631 financial advisors, already surpassing what we did in all of 2006. We’ve grown from 10,288 to 10,919. We should end the year comfortably in excess of 11,000, with 11,100-11,200 advisors.


#000000; FONT-FAMILY: Arial">#000000; FONT-FAMILY: Arial">Q. How about attrition? #000000; FONT-FAMILY: Arial">
We’re running at about 10.9 percent advisor attrition. We are not satisfied with that and are constantly trying to improve that. But it’s down from over 11 percent last year and higher the year before last.

Nov 2, 2007 8:35 am

10.9 versus 11.  Wow!

 
So EDJ has grown from 2002 to 2007 by 10% in advisors.  That's a net of 13 advisors per month.  You are hiring 200/month and growing the firm by 13/month.  Is my math wrong?
Nov 2, 2007 2:53 pm

my feeling is that CURRENT is all that matters: 2007 is 70/month.

Nov 2, 2007 3:23 pm

Jones has actually grown from about 8500 FA's 1/02 to 11,000+ 10/07.  That puts the growth per month at 35.  Like Jim said, below what we wanted.  And, FYI for a while we weren't hiring 200/month.  It got really down.  Some months to only about 100.  The firm focused on health of the current FAs instead of adding new ones.   

Nov 2, 2007 4:02 pm

What, exactly, is the relevance of the number of brokers at Edward Jones?

Nov 2, 2007 4:16 pm

The relevance is that as they grow the economies of scale increase...at least that's what the tea leaves in the kool aid used to tell me. 

 
I guess my math is always wrong.  When I was there in 2002 they had just under 10000 and now they are just under 11000.  If you look back at that Uptick magazine you can get an accurate number.
Nov 2, 2007 4:26 pm
spikedkoolaid:

The relevance is that as they grow the economies of scale increase...at least that's what the tea leaves in the kool aid used to tell me.



I guess my math is always wrong. When I was there in 2002 they had just under 10000 and now they are just under 11000. If you look back at that Uptick magazine you can get an accurate number.




OK, I'm not a Jones guy, so help me to understand this.



If an office with SA costs, say,$2000/month and we add one more broker to the office economy of scale would dictate that all things being equal the cost per broker would be $1000/broker. Fine. But as I understand the Jones model, when they add another broker, they're adding another office, SA, and everything else that's involved. Now, from reading posts here and elsewhere, IT per office runs on the order of $1300/month (arguably more than a little steep). As I see it, this does nothing to help the brokers.



What am I missing?

Nov 2, 2007 5:20 pm
Philo Kvetch:
spikedkoolaid:

The relevance is that as they grow the economies of scale increase...at least that's what the tea leaves in the kool aid used to tell me. 

 

I guess my math is always wrong.  When I was there in 2002 they had just under 10000 and now they are just under 11000.  If you look back at that Uptick magazine you can get an accurate number.




OK, I'm not a Jones guy, so help me to understand this.



If an office with SA costs, say,$2000/month and we add one more broker to the office economy of scale would dictate that all things being equal the cost per broker would be $1000/broker. Fine. But as I understand the Jones model, when they add another broker, they're adding another office, SA, and everything else that's involved. Now, from reading posts here and elsewhere, IT per office runs on the order of $1300/month (arguably more than a little steep). As I see it, this does nothing to help the brokers.



What am I missing?



PK I think your original question hit the nail on the head....who cares?  Unless one is an EdJ rep the question is moot.

Nov 2, 2007 11:30 pm
Philo Kvetch:
spikedkoolaid:

The relevance is that as they grow the economies of scale increase...at least that's what the tea leaves in the kool aid used to tell me. 

 

I guess my math is always wrong.  When I was there in 2002 they had just under 10000 and now they are just under 11000.  If you look back at that Uptick magazine you can get an accurate number.



OK, I'm not a Jones guy, so help me to understand this.

If an office with SA costs, say,$2000/month and we add one more broker to the office economy of scale would dictate that all things being equal the cost per broker would be $1000/broker. Fine. But as I understand the Jones model, when they add another broker, they're adding another office, SA, and everything else that's involved. Now, from reading posts here and elsewhere, IT per office runs on the order of $1300/month (arguably more than a little steep). As I see it, this does nothing to help the brokers.

What am I missing?

 
It helps the guy out down the street because they didn't hire anyone else in St. Louis, so that cost is spread across one more person now. In the short term they lose money, but later on when the office is profitable (lgain not BS profit) then LP returns should benefit. (that's the theory anyway-it's really GP profits that benefit).
 
Nov 2, 2007 11:46 pm

That reeks of "phantom gains" from the old LP days.



Oh well. None of my business. Thanks for the explanation.

Nov 4, 2007 9:01 am
joedabrkr:
Philo Kvetch:
spikedkoolaid:

The relevance is that as they grow the economies of scale increase...at least that's what the tea leaves in the kool aid used to tell me.



I guess my math is always wrong. When I was there in 2002 they had just under 10000 and now they are just under 11000. If you look back at that Uptick magazine you can get an accurate number.




OK, I'm not a Jones guy, so help me to understand this.



If an office with SA costs, say,$2000/month and we add one more broker to the office economy of scale would dictate that all things being equal the cost per broker would be $1000/broker. Fine. But as I understand the Jones model, when they add another broker, they're adding another office, SA, and everything else that's involved. Now, from reading posts here and elsewhere, IT per office runs on the order of $1300/month (arguably more than a little steep). As I see it, this does nothing to help the brokers.



What am I missing?

PK I think your original question hit the nail on the head....who cares? Unless one is an EdJ rep the question is moot.





It helps the firm as a whole. Although you add local overhead, you do not add much corporate overhead (keep in mind local overhead is fairly fixed, other than adding additional staff when you grow large enough). It helps the veterans, as they are profitable and receiving bonuses. The more profitable the firm, the more gets driven back to bonuses, GP and LP returns. In addition, as with all firms, it helps to have larger distribution as it relates to underwritings. Without the clout of a large distribution, we do not have access to the largest bond underwritings.



The reasons for being larger are pretty much the same as why every other firm wants to be large, including LPL, RayJay, etc.

Nov 4, 2007 11:13 pm
Philo Kvetch:
spikedkoolaid:

The relevance is that as they grow the economies of scale increase...at least that's what the tea leaves in the kool aid used to tell me. 

 

I guess my math is always wrong.  When I was there in 2002 they had just under 10000 and now they are just under 11000.  If you look back at that Uptick magazine you can get an accurate number.



OK, I'm not a Jones guy, so help me to understand this.

If an office with SA costs, say,$2000/month and we add one more broker to the office economy of scale would dictate that all things being equal the cost per broker would be $1000/broker. Fine. But as I understand the Jones model, when they add another broker, they're adding another office, SA, and everything else that's involved. Now, from reading posts here and elsewhere, IT per office runs on the order of $1300/month (arguably more than a little steep). As I see it, this does nothing to help the brokers.

What am I missing?

 
 
What are you missing??? You are missing the state of the art 1985 technology satellite communication system that FAs are getting charged $1400 per month for.  now that is a JOKE.
Nov 5, 2007 5:02 pm
Broker7:
Philo Kvetch:
spikedkoolaid:

The relevance is that as they grow the economies of scale increase...at least that's what the tea leaves in the kool aid used to tell me. 

 

I guess my math is always wrong.  When I was there in 2002 they had just under 10000 and now they are just under 11000.  If you look back at that Uptick magazine you can get an accurate number.



OK, I'm not a Jones guy, so help me to understand this.

If an office with SA costs, say,$2000/month and we add one more broker to the office economy of scale would dictate that all things being equal the cost per broker would be $1000/broker. Fine. But as I understand the Jones model, when they add another broker, they're adding another office, SA, and everything else that's involved. Now, from reading posts here and elsewhere, IT per office runs on the order of $1300/month (arguably more than a little steep). As I see it, this does nothing to help the brokers.

What am I missing?

 
 
What are you missing??? You are missing the state of the art 1985 technology satellite communication system that FAs are getting charged $1400 per month for.  now that is a JOKE.
Actually, if you haven't worked for Jones lately, you have no idea how good the technology is now.  Yes, it was dated at one time.  And it is strange that we still enter trades through the old green screen.  But 95% of what I do involves their intranet (JonesLink).  Most would be shocked at how far they have come in 12 months.
Nov 5, 2007 5:24 pm

But 1200 per month?????? It better be damn good technology...1200 * 11000 offices...wow, just a little pocket change I would say...

Nov 5, 2007 5:46 pm

That's the sticking point for me as an outsider.



The Jones business model, as I see it, is a great one if the firm is in the IT business, or the office furniture business, or any of the peripherals for that matter, but is not really efficient from the standpoint of the customers, namely the brokers.



Now I fully understnd that Jones is a business and as such is trying to maximize returns. It just seems to me that the way to do that is to maximize the profitability of the salespeople. Note that I didn't say "profess to make the brokers most profitable", but rather to actually do it. However, if the Jones people are happy with it, I'm happy for them. It simply demonstrates that it's not a business model for me.

Nov 5, 2007 5:55 pm

Don't forget the picture frame business. I remember receiving a beautiful framed picture of outgoing general partners. Turns out, one of the  GP's spouse had a framing biz.

 
Sorry Spiff....once again EDJ shows its true colors. Revenue sharing with a twist!
Nov 5, 2007 6:36 pm

Yeah, I thought that one was rather cozy too.  I know the Timms.  Been to their house.  Every time I change out one of the Jones pics for one of my own, I think about them.  What a deal.  However, they are great people.  If my wife had a biz that would benefit Jones and me at the same time, I'd try to get that biz too.   

 
Nov 5, 2007 8:04 pm

the interview goes on:


#000000; FONT-FAMILY: Arial">#000000; FONT-FAMILY: Arial">Q. How about your incomes, sales and profit sharing in ’07? #000000; FONT-FAMILY: Arial">
#000000; FONT-FAMILY: Arial">We’ve just completed the second trimester at the end of August, and it was the second-most profitable trimester in the history of the firm. We share a significant amount, about 40 percent of our operating income, as variable compensation, either profit sharing or bonuses, primarily with brokers but also with home office and branch staff.


#000000; FONT-FAMILY: Arial">#000000; FONT-FAMILY: Arial">The more profitable we are and the greater results that we have, the greater that variable compensation piece is. It’s been a very good year.


#000000; FONT-FAMILY: Arial">#000000; FONT-FAMILY: Arial">Our revenues are up 22 percent [from $3.1 billion in 2006], and our profitability is up about 55 percent. We had net income last year of about $350 million, and we’re running about 50 percent ahead of that

Nov 6, 2007 10:01 am

Broke24 wrote "

Actually, if you haven't worked for Jones lately, you have no idea how good the technology is now.  Yes, it was dated at one time.  And it is strange that we still enter trades through the old green screen.  But 95% of what I do involves their intranet (JonesLink).  Most would be shocked at how far they have come in 12 months."
 
So you are saying the trades you enter and all the accounts you open on the green screen is  5% of what you do  when on Jonesnet?  Edward Jones is a sales company...I hope the green screen is more important to you than 5%...without the green screen, you and the GPs would be broke.
 
For those of you that are not familiar with the green screen, it is a Linux program from the late 80's before the existence of GUI (windows point and click) that all jones brokers still use to execute trades and open new accounts.  My clients would ask why I am using an old DOS program to open their new account.
Nov 6, 2007 10:07 am

And Jones doesn't subscribe to the Cost Basis Reporting System that everyone uses because it costs too much money.  Their fomer CIO was quoted as saying, "The BOA (sales assistant) should enter the cost basis manually."

 
Ancient Technology system...Ancient Thinkingl...
 
I'm getting Voice Over Internet Protocol installed in my office...Jones is still asking their FA's to use the answering machine...
 
Just a couple of examples...I could go on and on.