From the February 2009 issue of Research Magazine • Subscribe!

Edward Jones Now Close to 11,200 FAs; Will 'Take Boring Any Day,' Says Weddle

Jim Weddle, the managing partner of Edward Jones, explains what the broker-dealer is doing to stay out of the headlines and in front of clients, as well as prospective advisors.

What's your latest advisor headcount?

We had a good year in 2008 in terms of how we grow, which is through organic growth. We refuse to pay "front money" and don't think it works. We attract good folks from other firms, but primarily attract those who are not yet financial advisors and who want our support to become advisors.

We were up a net 953 advisors through the end of 2008. We had targeted 8 percent to 10 percent growth and are hitting about 9 percent.

This growth is primarily in the United States, but we include the United Kingdom and Canada.

As of January 1, 2009, we had 11, 183 advisors in the United States, 634 in Canada and 338 in the United Kingdom. We've grown nicely in the United Kingdom and are getting to the point where the hiring pipeline is where it needs to be.

Have you recently modified your compensation or hiring?

I'd say that 2008 was not unique. We've just done what we've done in years past. In 2007, we added about 850 or so advisors. In 2006, we grew by 555.

The average age of people in our training program is 35. Most have done something else professionally for 10 to 12 years, such as being a CPA or a teacher, and they've been looking to get into this industry.

We have a terrific training program and are a private company, so we can invest in our trainees and their ramp- up over three to four years. We will get them to where they need to succeed in the long term.

We also continue to refine the screening process.

We've had great success in '08 in the program we've been building for several years, starting new advisors through the "Goodknight" program, and two other variations of this program. One pairs a veteran producer who has too many clients with a new advisor, who works at the same branch for one to two years on a small percent of assets but a good number of accounts that are jointly serviced. The focus is namely on the new advisor providing stellar service.

This gives veterans more control over their accounts and new financial advisors a terrific start. We're having an amazing success rate with this program. Some 600 of the advisors that started with us in 2008 are in the Goodknight program, which we began about seven or eight years ago. It involves lots of mentoring and support.

We also offer net advisors our partner plan, which allows them to share office space, but not clients, at a branch. And there's a legacy plan that entails working on accounts on behalf of other advisors, who have clients that are out of their local service area or have moved away. The veteran advisor may then suggest that these client accounts be given to a new advisor via an introduction, which especially works well with our organic-growth plans.

How is Edward Jones positioning itself given all the changes in the industry?

Our culture is at the center of our firm and its growth. We position ourselves with our convenient locations and personal service. Individual investors like the local access and our calling on them. This builds face-to-face relations. It's not always efficient, but it is effective.

In full bull markets, it's hard to call attention to this approach. But now that we're in a bear market, it's easier to highlight. We are a pretty conservative place with an old-fashioned philosophy, which is buy high quality, diversify and be patient as a long-term investor.

We do not market or sell auction-rate securities or sub-prime mortgages. They didn't fit with our quality requirements.

We work on our strengths to understand what we do well vs. what we don't do well. I'll take boring any day.

Our clients don't pay us to be clever. Everyone wants quarterly earnings, dividends and increasing results.

As a privately held firm, we do not have to contend with the 90-day reporting cycle.

We don't necessarily distinguish ourselves in up markets, but in down markets, our value of fostering strong advisor-client relationships becomes so clear. And there are lots of frightened individual investors out there.

Clients need reassurance, and access to our advisors and branches is a clear advantage.

What were Edward Jones' biggest milestones in '08?

We introduced our mutual fund program, Edward Jones Advisory Solutions, which is a fee-based platform that's different from what the industry has done in the past. We got all our folks licensed and then rolled it out in mid-year.

It puts the best mutual funds and ETFs with the lowest costs into about 25 portfolios; in general, we prefer to not go with small fund managers for these portfolios. And we've built in automatic rebalancing. We charge an annual fee to go with the enhanced service, reporting, etc.

In only six months, it's a young program but one that's had a very successful launch with $4.5 billion of assets. Overall, we started 2008 with $500 billion in assets.

In addition, as part of our Advisory Solutions, we've rolled out new improvements and pieces for our technology on the desktop. About 18 months ago, we adopted a financial-assessment tool, really a financial-planning tool, for the management of each client's accounts and related investment recommendations. We have a good adoption rate and a high usage rate.

In the fall, we rolled out a relationship manager, a desktop tool that spans the full relationship with a client, including banking, investments, loans, cash, etc. This allows advisors to see the relationship in a very focused way, i.e., the full depth and breadth of the relationship and what you don't have in place. For instance, the client might have our 529 and an IRA but not an Edward Jones credit card or mortgage, which could lower their monthly payments.

Also, we have launched two pilot programs to explore how best to grow in areas where the greatest demographics of clients are potentially. Traditionally, we have grown via our veteran advisors and their mentoring of younger financial advisors.

But what do we do in newer areas where we have fewer veteran advisors? We refer to such areas as location-rich markets, such as Phoenix and Toronto, where there are many individual investors. We want to grow relatively quickly there.

In Canada, we are based outside Toronto. And in the Southwest, our headquarters is in Tempe, Ariz. We want to see what works and what we can export to other markets to help fuel growth. We have a huge potential in the United States, Canada and the United Kingdom.

What is Edward Jones doing to help advisors and clients weather 2009?

Communication becomes critically important at these times of uncertainty, so we put ourselves in front of our associates as much as possible. For example, I did three question-and-answer sessions in one recent week with associates [employees], of which we have about 4,000 on three campuses. So, we had about 250 or so associates at each town hall, and I went to Canada for the same type of event. We also do quarterly video events for advisors and branch staff with 30 to 40 minutes for questions.

I've been to more than 20 regional meetings in the past 12 months with financial advisors in addition to the quarterly video events I do for the field. Plus, I've done about six client events to keep my finger on the business; no one can be isolated at times like this. And clients, as well as advisors, value candor.

Any opinions on what '09 has in store?

I'm encouraged by a couple different things, such as the way the Treasury secretary and Federal Reserve chair have quickly assessed the different issues and challenges facing us [in late-2008] and have come up with actionable programs. And they've reassured the markets as needed to be done.

I'm also impressed by the team being put together by President-Elect Obama [before the end of '08] for the sake of the economy. These people are experienced, and that should make for an orderly transition, which may not have been as good as it could have been in the past.

On a few recent Fridays with bad news, like when we had no bailout of the automakers and had news of the Bernie Madoff affair, the market still went up. And when job losses of 550,000 were announced, it went up again. So we may be looking for reasons to go up, not down. We were at 7,500 [on the Dow] and are now at about 8,500 [as of January 13].

It's a real-estate-led recession, and we'll probably have to wait for that sector to get better for the general recovery. But stocks are often the economy's leading indicator.

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