From the August 2006 issue of Research Magazine • Subscribe!

August 1, 2006

Keeping Up with Edward Jones

With its sole focus on individual investors, solo practitioners and door-knocking, face-to-face prospecting, Edward Jones has long taken a march-to-its-own-drummer tack to financial services.

And that model has worked well indeed. The neighborly 84-year-old company has grown from a regional firm with only 304 branches in 1980 to a global presence boasting about 10,000 offices in the U.S., Canada and the U.K.

Now Edward Jones is pulling out all stops to expand even more. Big growth is in fact what Managing Partner James D. Weddle has targeted since taking the helm in January of this year. With 9,300 branches, Jones already has more U.S. offices than any other brokerage. But Weddle wants to boost that number by more than 10,000 over the next decade.

The strategy behind such a tall order: to have plenty of locations handy to the nation's aging baby boomers, most of whom welcome personal service in charting their retirement-income course.

A boomer himself, Weddle, 52, has been with Jones for nearly 30 years, starting as a part-time intern in the research department while earning his MBA at Washington University in St. Louis, where Jones is headquartered.

At 22, he and his bride Stacey relocated to Connersville, Ind., to open the firm's 200th branch. After seven years as an Investment Representative there, Weddle was named a principal of the firm, returning to St. Louis, where he rose in mutual fund sales and marketing, and to area leader for the East Coast. In 1997, he was appointed manager for all branch offices.

Only the fifth managing partner in firm history, Weddle has spent his entire career at Edward Jones, developing a management style that centers on delegating responsibility, a mode he bets will facilitate his ambitious growth plan.

Research chatted with the Elgin, Ill.-born certified scuba diver one Monday morning, an up-and-at-'em time the energetic executive clearly embraces.

How is your approach different from that of previous managing partners?

No. 1, I'm not a micro-manager by any stretch of the imagination! I'm very comfortable with delegation and specific responsibility-based management, where everyone understands what the results need to be. It gives people an opportunity to excel.

I hope I'll be known as a person who took a large, successful [firm] and organized it in a way that facilitated even larger growth. Our culture does "small" very well; we need to find ways to continue to feel like a small company even though we've grown very large and have aspirations to grow even larger.

How has the firm grown so?

For as long as I've been with Edward Jones, the growth has been organic. We haven't acquired or merged with another firm [since 1943]. We've always been very protective and proud of our culture.

Now, we haven't grown as quickly as we'd like in the last couple of years -- but things are starting to accelerate.

How have you re-organized the firm?

We need to keep the decision process very efficient and effective. We'd gotten a little bit away from that. A lot of people were looking to me to make decisions for them in their areas of expertise. I said, "Know what? We're going to change that." Instead of having the 15 members of our management committee responsible for our 15 very large divisions -- like operations and marketing -- and individually responsible to me, I've asked three individuals to take responsibility for more than their own divisions.

For making administrative decisions?

They're running the firm on a day-to-day basis. That way, people don't have to line up outside my office to get my stamp of approval on big decisions when it comes to running their piece of business.

What other new initiatives have you taken?

We needed to re-energize our growth. The opportunity out there in terms of our focus on individual investors and their approaching retirement has never been better -- I mean has never been better -- than it is right now! So we've had some people who have taken on responsibility for recruiting, hiring and training. We have a wonderful new Investment Representative training program. The last two months [May and June] we've had record numbers of applications for IR [jobs].

Has the advisor compensation structure changed?

Last year we increased the payout in a couple of areas and also made some significant changes to our compensation for new IRs. That's attracting older, slightly more successful individuals. Both of those are good outcomes. New IRs are getting a combination of salary plus commission and bonuses when they reach certain points in their career.

What about established IRs?

On a day-to-day, week-to-week basis, they're commission-based. And three times a year we pay a bonus on the profitability of each IR's branch. Also, we have profit sharing for every full-time associate [employee]. And there's a travel-award program and an opportunity to become a limited partner in the firm.

Do you first choose a branch location and then hire advisors to work there?

Sometimes. But if we identify a large or small market that we'd like to be in, we focus our efforts to find someone who's already there -- maybe in the business, maybe not. We usually look for folks that have been successful in the past and have a pattern of increasing responsibility and compensation. That might be someone right out of college. We're looking for a pattern of accomplishment and consistent responsibility.

We don't need to grow with additional locations in every market, but there are some where we aren't as strong and visible as we'd like to be -- the Northeast and the West Coast.

What's your target number of total IRs?

I think we can have 20,000 investment representatives in 10 years. We need to grow so we can have locations convenient to [at least half] those aging baby boomer investors who are approaching retirement and to those who have already retired. You can't paint a better scenario than the one out there today. But you have to grow to where you can service that potential, or somebody else will meet that need. And we sure don't want to let that happen!

What other changes have you instituted?

Putting a lot of effort into opening up communication between headquarters and our branches. We'd gotten a little away from that over the last couple of years, too. At the beginning of the year, I promised to do six live [internal] video [conference] updates. We've just completed the third. I speak about the firm's progress, performance and objectives, then take 30 minutes of Q&A. It's great to respond to what's on people's minds.

How and when does the management committee create strategic plans?

We have quarterly off-site sessions. But now we do them a little differently: On the first night, each of us flies to a different location and meets with [some] IRs about their issues and suggestions. The next day we all [reconvene] and spend all morning discussing what we've heard. You get a pretty good cross-section of input. It's [moved] us closer.

Why did John Bachmann -- who, like you, started as an Edward Jones intern and went on to become managing partner -- relinquish his post as managing partner?

John turned 65 two years ago. According to the firm's partnership agreement, when you turn 65, you no longer can be a general partner.

And not being a general partner, you can't be the managing partner. John now spends a good amount of time in the U.K. continuing to build the firm there.

You succeeded Doug Hill, who joined the firm in 1968 and was managing partner for only two years after taking over from John. Doug stepped down in December 2005 following a regulatory investigation into revenue-sharing payments made to the firm by mutual fund vendors. Please elaborate.

Before Doug became managing partner, he was our chief operating officer for several years. During that time and when he was managing partner, many of the revenue-sharing arrangements were put in place. Subsequently, the NASD, New York Stock Exchange and the SEC said, "There's nothing wrong with revenue sharing, but you didn't disclose it well enough and it was a significant amount of revenue to the firm."

Part of the settlement was that, in addition to the fine paid, Doug would step down as managing partner. He's still an active partner of the firm, but he doesn't play a role in major policy decisions.

What are you doing to re-establish relations with regulators?

In January, we said, "Let's get proactive." So we asked for the opportunity to meet with the NASD, New York Stock Exchange, SEC and the various states; and we have done so. We don't have a problem -- and that's the best time to meet with these people and tell the Edward Jones story. Put a face on the name: I'm the new guy -- in this role, that is. I want to make sure they have an understanding of our business model because it's different from an awful lot of others.

What do you think of that business model, and will you maintain the tradition?

It's absolutely brilliant, a thing of beauty. We have a very strong culture and set of values. It's important for us not to compromise those values by chasing after some new direction or combining with another organization.

Oh, have other companies been wooing you?

There's the occasional contact. But we're just not for sale.

Is wealth management a part of what Edward Jones is about?

Sure. It is now and has been. The way we work with an individual is to go in and introduce ourselves, get to know them and what their financial objectives are. You learn all about them and then make the appropriate investments. To a certain extent, a lot of people would define wealth management as exactly that. Now we're rolling out some new software tools that will help in the process of financial planning.

Will you retain the structure of one IR per branch?

We're absolutely convinced that that attracts the best people. We need self-starters who are very self-assured, focused and disciplined. When you hire that kind of individual and equip them with the training and tools that we do, it's an opportunity that's very attractive to the best quality people.

Is it harder to knock on doors these days and create a rapport? That is, are prospects more cautious about revealing private information?

It's never been easy. But people often say, "Wouldn't it be nice if doctors still made house calls?" Well, that's really what we're doing. It's personal delivery of financial expertise. We knock on your door in the middle of the day and try to get to know you a little. It's very difficult. But it certainly distinguishes us from our competitors. We don't tell IRs, "Just do this for a while and get started." It's the way we work career-long. Certainly after a period, you have referrals, but you always continue to prospect.

What's today's biggest challenge facing financial advisors in general?

With market conditions and historically low interest rates, it's very difficult to help people understand how much they need to save and accumulate to live comfortably in retirement and how to figure out how they're going to safely and predictably create income from their nest egg.

Edward Jones has been conducting some market research. What's one of the big perceptions that non-clients have about the company?

In some markets, we're exceptionally well known; in other markets we're not known at all, or nearly not at all. There are simply too many individual investors who don't know us at all. Therefore, we need to continue to grow, especially in those markets where we don't have a broad footprint.

You're in big markets in this country, though primarily in the suburbs. Do you use this same strategy in the U.K.?

Yes. In the U.S. about two-thirds of our offices are in major metropolitan markets, but we're not in downtown New York City, for example. In the U.K. we use the same business model. We're not in London; we're in locations like Liverpool and Leeds.

Why is Edward Jones consistently named by Fortune, and other publications, as one of the best places to work?

We treat all our associates [employees] with respect. They have the opportunity to become owners, limited partners. We're getting ready to have another limited partnership offering this fall.

What has been the biggest hurdle that you've personally overcome?

Starting out in Connorsville, Indiana, as a brand-new investment representative. I didn't know a soul, not a single person. My wife Stacey and I moved there with our belongings in a rental truck. One of the things I'm most proud of is having built a very successful Edward Jones branch from scratch. It was day to day. It wasn't easy.

You've been with the firm your whole career. Did you always, or ever, aspire to become managing partner?

There were times when you thought, "Boy, that would really be something." But if the opportunity wasn't [to be], I was OK with that because I had a great big area of the firm that I was responsible for and had been on the management committee for a good long while. When the role needed to be filled and I was asked if I would agree to consider it, I briefly chatted it over with my wife. But it wasn't a hard decision. I said, "Absolutely, yes. I'd like to be considered!"

It seems to be working out.

So far, so good!

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