Edward Jones today announced the sale of its U.K. business operations to Towry Law, an independent wealth management firm based in the U.K., for an undisclosed sum. The operation was simply too expensive to operate, and only accounted for about 1 percent of the firm’s global business.
Edward Jones is “a very cautious firm that carefully contemplates where to invest its capital,” says Aite Group research director Alois Pirker. “And it appears the firm will use the capital from the sale of its U.K. subsidiary to invest in growth opportunities in the United States, specifically updating technology and product infrastructures.” Meanwhile, Pirker says the firm continues to grow at a fast pace in the United States by on-boarding breakaway brokers from captive brokerage firms (like Smith Barney).
Jones opened its first U.K. office in 1998 and today has more than 300 offices around the country, with a total of 1,000 employees serving 50,000 clients with £1.5 billion assets under management.
“We were in the UK for 11 years. A lot of people asked why did it take you so long to figure this out,” says Jim Weddle, managing partner of Edward Jones, referring to the sale. Weddle says the firm’s original projections were that it would take 10 years to build the infrastructure to eventually become profitable, but the Jones business model just wasn’t well adapted to the U.K. “Since we compete on the basis of convenience and service, which translates to branch office facilities and people, it’s very expensive to run our business model in the U.K.,” says Weddle.
Jones will be taking a $70 million write down against earnings to exit the U.K.. It will leave the applicable regulatory capital at the U.K. firm and continue to pay the U.K. home office lease, while Towry takes all the clients, associates, and branch leases. “We’re basically taking a hit equal to three months of earnings to exit the U.K.,” says Weddle.
Jones also has operations in Canada, but the U.S. makes up the bulk of the company’s business. Last year, the firm’s U.S. operation generated $3.5 billion in revenue of a $3.8 billion total. As of July, the U.S. division of the firm had $435 billion in assets under management, and as of September 25, it had 11,303 branches, with 12,777 financial advisors serving nearly 7 million clients.
Jones largely recruits professionals who have never been in the financial services business before and trains them in-house. But so far this year, the firm has hired almost 100 advisors from rival firms, up from 36 last year, says Weddle.