Edward Jones History

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Jun 11, 2008 3:03 pm
For those who are interested...here is some history on Jones:   Edward Jones was founded by Edward Jones, Sr., in 1922. In 1948, when the firm was a small St. Louis brokerage, the founder’s son, Edward D. “Ted” Jones, Jr., joined the firm. He began his career as a broker in St. Louis but built a business journeying around the surrounding rural communities as a traveling salesman. In 1957 he supported the establishment of the firm’s first branch office, in Mexico, Missouri, and in 1960 an office in Pueblo, Colorado, even though it required a 1,500-mile telegraph wire to link to St. Louis. Although none of the national or regional firms, or even his father, believed that a town with a population below 25,000 could support a brokerage, Ted Jones proved them wrong. His success gave rise to the original Edward Jones strategy of placing onebroker offices in rural locations where the competition was primarily the local bank. It also moved the firm quickly from being the 9th- or 10th-largest brokerage in St. Louis to being the 2nd largest.

By 1970, Ted Jones had built a firm of 100 brokers, mostly in the region surrounding St. Louis. He had also laid the foundation for the principles by which the firm would be run. As a partnership, the firm was built on the power of individual entrepreneurs in offices with one financial advisor (FA) and one branch office assistant (BOA). He maintained that owners should be employees of the firm and even denied his sisters a share in the firm, as they did not work there. When asked after his retirement why he never sold out and became as rich as Sam Walton, Jones replied that he was the richest man in America: “I have a wife who loves me in spite of all my faults. I have four dogs. Two love only me. One loves everybody. One loves no one but is still very loyal. . . . I enjoy my business. I love my farm and my home. I have a few close friends, and money has never been my God.”

About this time, John Bachmann, a partner and FA hired in 1963, suggested to Ted Jones that the firm pursue an ambitious expansion strategy. The letter he wrote to Ted describing the key features of that strategy and suggesting a goal of 1,000 offices became part of the lore of the firm.

In the next 30 years, with Bachmann as managing partner after 1980, Edward Jones grew rapidly. Leveraging the insights of Peter Drucker, a consultant to the firm, Edward Jones focused on serving the individual investor in a personal relationship. It entered metropolitan areas after 1981 over the objections of Ted Jones, who believed that the firm should locate “where there is no competition.” Drucker countered that competition only demonstrated how different the firm was from most brokers and that metropolitan offices were actually more profitable. The firm faced occasional challenges, such as in the 1980s when real estate partnerships that the firm distributed turned out to be bad investments. This episode triggered the development of a product review department charged with the responsibility of approving new products and given authority to decline the firm’s participation in such investments if it deemed them too risky.

However, for the most part, the firm adhered to a straightforward business practice that allowed for geographic expansion through the replication of the standard Edward Jones office. In 1994, the firm opened its first office in Canada, modeled after a typical Edward Jones office in the U.S., and in 1997 it similarly entered the U.K. market.

During the boom of the 1990s, Edward Jones’s strategy paid dividends. The firm increased its market share of brokers threefold and outperformed the industry average profitability by 10%. In 2000 and 2001, Edward Jones was named the best place to work in America by Fortune magazine.

When Bachmann passed the position of Managing Partner to Doug Hill in 2004, his successor’s task appeared to be one of “steady as she goes.” Regulators, however, soon accused Edward Jones and other brokerages of accepting payments based on the volume of business placed with mutual fund companies (a practice known as revenue sharing). Regulators worried that this would influence brokers to recommend certain funds and they alleged that this potential conflict was not adequately disclosed to investors. The company, without admitting or denying any of the allegations, eventually agreed to settle regulatory actions and class action suits for $202 million. Doug Hill voluntarily retired as Managing Partner, and Jim Weddle took the reins in January 2006.

Jun 11, 2008 3:21 pm

And you point is what???

Jun 11, 2008 4:26 pm


  Lambda, what's with that?
Jun 11, 2008 5:49 pm

Spiff is proud of you. I think.

Jun 11, 2008 6:27 pm

That sure was a lot to type…you practicing a speech for the Summer Regional?

Jun 11, 2008 10:53 pm

Jun 11, 2008 11:01 pm

Spiff, I guess my 200 million number was right on.

Jun 11, 2008 11:15 pm

Nice story.  It’s too bad that after all “Ted” put into your firm, you still have brokers (not advisors) splitting breakpoints and what not.

      No knock on you EDJ guys here that do the right thing.
Jun 12, 2008 10:02 am

Ahhh there is so much more to add Mr. Lambda…

  Question-   Anyone care to take a stab at why the General Parnters of EDJ have another broker dealer under their umbrella called Conestoga Securities? The key GP's are the principals according to the State filing.
Jun 12, 2008 10:35 am

[quote=footsoldier]Ahhh there is so much more to add Mr. Lambda…

  Question-   Anyone care to take a stab at why the General Parnters of EDJ have another broker dealer under their umbrella called Conestoga Securities? The key GP's are the principals according to the State filing.[/quote]   What no mention of EDJ Ventures, LHC, Boone National S&L,  Passport Research, or CIP?   Perhaps this will help with the conversation.  I doubt it, but I'm sure foot will espouse his conspiracy theory momentarily:   EDJ ownes 100% of the outstanding stock of Conestoga Secs, Inc who owns 100% of the outstanding stock of CIP Management, Inc who is the managing general partner of CIP Management, LP, LLLP who is the managing GP of Community Investment Partners II LP, LLLP, Community Investment Partners III, LP, LLLP, Community Investment Partners IV, LP, LLLP, and Community Investment Partners V, LP, LLLP business development companies.  EDJ also holds all the LP equity in EDJ Ventures, LTD.  Conestoga Secs, Inc is the GP of EDJ Ventures, LTC.    Fire away with the conspiracy theory.  I'm sure you've got a good one. I'm sure at some point it ties in with the Knights Templar and Skull and Bones.           
Jun 12, 2008 11:19 am

My name is lambda and I drank the koolaid

Jun 12, 2008 11:38 am

OK guys…looks like my attempt to provide some info backed fire and maybe I snuck into the fridge and drank the koolaid a little early !!! 

Jun 12, 2008 12:35 pm

So where does the “Serving Individual Investors since 1871” comes from?

Jun 12, 2008 12:56 pm

Comes from buying Whittaker & Co who WAS founded in 1871.  Common practice was to adopt the starting date of the oldest component of the company.  Jones hasn’t been using that tagline for a few years now.   

Jun 12, 2008 1:53 pm


  Any idea what all the entities are or what they do? Or how the affect the company bottom line?    
Jun 12, 2008 2:56 pm

First, let me say thank you foot for giving me something to do today rather than make calls. 

  According to Jonesnet, CIP is a business development company that was formed in the 1990's.  The majority of the investments the partnerships made were in the medical field.  All of the CIP dollars are currently invested, so no additional investments are being made.    I have no idea how they affect or if they detract from the Jones Financial Companies bottom line.  I found a document that listed CIP along with some other STL based companies as a Venture Capitalist organization.  The gist was, STL companies, ie AGE or Stifel or Enterprise Leasing, investing in STL startup medical companies.    There is a guy at HQ that Jonesnet says you can call if you have questions about CIP. 
Jun 12, 2008 3:26 pm

It probably has something to do with tax or risk/liability management.  When I worked at a major hotel company in finance, we were investing in some type of oil co-generation plants because we got these huge tax incentives.  Had nothing to do with the core business, it was just one of those tax shelters.  And this was just over the past 10 years (ended maybe 2006?), not in the go-go tax shelter days.  All big companies use creative financing structures for various purposes.  The last firm (non-financial firm) I worked for had over 100 LLC’s, LLP’s and C Corps all intertwined.  This was primarily because of tax reasons and partnership involvement.  Each LLC had different levels of participation by various individual and entity partners.  No cloak-and-dagger stuff, just pure above-the-board financial reasons.  It kept PWC and my team quite busy during tax season.

Jun 12, 2008 4:06 pm

Man, that’s no fun.  Not even the hint of a conspiracy theory.  Just boring tax stuff. 

Jun 12, 2008 4:16 pm


How did Jones handle directed brokerage when it was a common practice? You were at home office then. Did they have a directed brokerage dept next to the bond desk? I remember the company montra was that there was only one profit center,  the IR/FA. How did that revenue get recognized?

Ah the conspiracy theorists are raising their heads now!!!!!!!!!!!!!!
Jun 12, 2008 5:04 pm

Yes, I was at the home office then, but had zero contact with the bond desk. 

  You can spin that montra however you choose.  The reality is that there are several lines of revenue with revenue sharing agreements being one of the largest.  I'm sure there was something from directed brokerage.  Both of those things were common practice.    That's a sad attempt at a conspiracy theory.  A good one would be that John Bachman is a member of Skull and Bones.  Conestoga was actually a private LP set up under his watch to fund "businesses" whose sole purpose was to influence the monetary system.  Their goal is to send our economy into a tailspin, collapse our financial system, and once it does, the shadow government that already exists will take power and reassert our world dominance.    Now that's a conspiracy theory.     PS - to my knowledge, there was no directed trading desk.