If Edward Jones reps are dismayed by the firm's record-setting SEC fine and the subsequent dismissal of their managing partner, Doug Hill, they're doing a good job of covering up.
“They've told us not to be alarmed or anything, and we're not,” one rep says. “We had known for a while there was going to be a fine, and we knew someone was going to take the fall.”
Still, all is not well at the usually hunky-dory Ed Jones. The SEC fine — $75 million to settle revenue-sharing charges — is the highest for such an offense in history. The black eye is all the more noticeable given Edward Jones' lily-white reputation.
Hill's pending departure is equally surprising, if not entirely shocking. The firm announced in an SEC filing that he would step down at the end of 2005. Hill took the job in January 2004 from John Bachmann, becoming only the fourth managing partner for the firm in its 81-year history. His tenure will be the shortest, by far. Hill had no comment at press time about his impending exit, and insiders are mum so far about a replacement. Ed Jones reps say management, predictably, is taking a stay-the-course attitude.
It was not considered a major surprise when Ed Jones announced in January that Hill was leaving. The firm's reputation was dragged through the mud on his watch, particularly in the realm of mutual funds, which constituted 43 percent of the firm's total revenue in 2003.
Noted in the filing was the fact that Jones advisors were motivated with the contests in which they qualified for trips based on sales of various funds.
Insiders argue that Hill was more or less a fall guy, noting that the revenue-sharing arrangements at Edward Jones had been in place long before Hill took over the top spot. The SEC filing makes that clear, pointing out a memo written in 2000 by the firm's director of mutual fund marketing, which said his department was “the greatest contribution to the Firm's bottom line” thanks to its ability “to continue the focus on selling preferred fund families and the subsequent leverage this gives us to negotiate revenue-sharing programs with vendors.”