Edward Jones is so fired up about expanding its troop of advisors that it has recruited recruiters from wirehouses—Merrill Lynch, Morgan Stanley, Wells Fargo—to help comb the country for choice candidates. For a regional, Jones is big; now it wants to get bigger.
Indeed, raising the firm’s FA head-count has been a chief priority dating from the financial crisis: In 2010, the brokerage, ranked by Fortune magazine for more than a decade as one of the top 10 companies to work for—this year, No. 4—netted only one new advisor. In 2011, things worsened: the FA ranks declined by 325.
The next year, Jones, galvanized, got cracking and launched what it dubbed a “talent acquisition strategy.” The decentralized approach is a major, proactive initiative to grow the firm’s force of FAs, who typically operate one per branch.
At the core of the effort are 17 three-to-six member recruiting teams deployed throughout the country. Inserting themselves into the community and working with existing Jones FAs, they’re locating potential hires, including registered advisors, career changers in sales and service from other fields, local folks of influence and people in transition, such as military personnel and recent college grads.
“Recruiting advisors is critically important. We’re simply not large enough,” says Jim Weddle, managing partner, who heads the St. Louis-based firm. “We want to be the first choice of serious long-term investors. In many of the larger markets, we’re not—but we think we can be.”
To that end, first of all, advisor compensation has been increased. The shift amounts to a $25 million investment.
Right now, Jones has 13,000 FAs in the U.S. It aims to boost that number to 20,000 by 2020. For 2014, the goal is to hire 3,000 advisors, for a net increase of 800.
The new tack is working. In 2012, Jones grew by net 200 advisors; last year, by 660, after recruiting 3,000. The median age of new recruits is 38. Jones’ attrition rate—FAs lost through retirement, death or compliance termination—is 10%. Less than 1% of FAs leave for wirehouses or go independent. But Jones’ wash-out rate at the three-year mark is high: Only 35–40% of, say, 100 new FAs remain with the firm.
Moreover, just like other brokerages, Jones is losing many FAs to retirement. According to Cerulli Associates, the average age of financial advisors is 50.9 years; but almost a quarter of Jones’ advisors are 55 or over.
To help address the retirement issue, about a year ago the firm rolled out a “retirement transition plan.”
“We’re anticipating that a good number of our folks will be retiring,” Weddle says. “There are incentives for a veteran to assist a number of FAs that are doing a good job by transferring some of their clients to them,” Weddle says.
The vets are paid to create additional branches by transitioning clients to other Jones FAs even when their child or friend—who must pass the firm’s screening process—is their succession plan’s main recipient.
“We believe advisors should consider three new FAs,” says John Rahal, the partner responsible for financial advisor talent acquisition. “If the veteran says they want to transition only one or two, then they sacrifice some of their retirement compensation.”
As for recruiting new FAs, the brokerage is anxious to create more branches in high-population metropolitan areas such as New York City, Philadelphia, Chicago, Dallas and Los Angeles. That’s a switch, since most of its advisors are now located in the suburbs, including outer parts of the above-noted markets.
In the push to attract more successful candidates, the firm is paying a heftier first-year base salary with an income guarantee. It also has restructured its bonus program.
This year, about 10%, or 300–350 hires, likely will be registered advisors hired from within the industry.
Though Jones is certainly committed to recruiting wirehouse FAs—and it has—the regional firm is just as resolute in refusing to pay them a signing bonus.
“We do not and will not pay upfront bonuses to get people to join our firm,” Weddle stresses. “We have a salary plus incentive bonus based on assets transferred. We’re hiring a good number from the competition. I’d love to hire more, but I know we’re competing for talent with one arm behind our back. However, if someone is looking for the biggest payday, they’re not Edward Jones [material] anyway.”
The scale might tip, though, when FINRA’s proposed rule requiring recruitment-deal disclosures goes through.
“Once in place, it might level the playing field,” Waddle says. “That will work to our benefit and to the detriment of some of our competitors. Once the sun is shining brightly on all the details, they might redesign the compensation they offer. But until that [regulation] is firmly in place, while other firms continue to write big checks, we’re not changing what we do. We don’t think signing bonuses are in clients’ best interest.”
Ideally, Jones is hoping for about 55% of new hires to be career changers and from 10%–15% each for these categories: registered advisors, recent college or grad school grads and people exiting the military.
Jones hopes to raise its 37% new-FA retention rate to between 45% and 50% by hiring individuals of high quality who, prior to signing on, have a deep understanding of what building an advisory business at the firm entails.
Before kicking off its new strategy, Jones relied mainly on its existing FAs to recruit advisors from their pools of friends, relatives and acquaintances. But with the 2008–2009 meltdown, the advisors were too busy focusing on clients to bring in potential FAs, according to Rahal.
“Quite frankly, our pipeline declined to a point where we needed to make a change, as evidenced by the net decline of 325 advisors in 2011,” Rahal notes. In fact, “it was imperative for us to revamp our recruiting effort. With many millions of baby boomers, Generations X and Y people and millennials, there’s going to be a battle for [advisor] talent simply because of the sheer numbers. We had to come up with a proactive sourcing strategy that would allow us to get great talent.”
Jones has chiefly targeted career changers for at least the last two years. According to Weddle, these rookies stand the best chance of beating a faster path to success. The base salary for such new FAs has gone up from $30,000 to between $55,000 and $65,000. Those who earned more than $125,000 in other fields receive a higher salary.
“Our old offer wasn’t structured in a way or [wasn't] significant enough to allow us to be an attractive opportunity for some folks who would have been terrific advisors—but today it is,” Weddle says.
About 10% of recruits are registered advisors. They receive an income guarantee based on a percentage of their trailing 12-months’ gross production, plus $3 for every $1,000 in client assets they bring over.
“Were looking at how large the advisor’s practice is and how many clients they serve,” Rahal notes.
Base pay for recent college grads has risen from $25,000 to $35,000.
Further, a key Jones selling point is the opportunity to become a limited or even general partner of the privately owned firm. A minimum of three years’ service is required, and branch profitability is a big factor. Usually, it takes four or five years to be offered a limited partnership, Weddle notes.
In its effort to gain traction in more populous markets—including the goal of adding 500 to 3,000 branches to the 105 Jones already has in greater metro New York City, which, on its grid, takes in Northern New Jersey—the firm may be deviating from its one-advisor-per-branch policy because of high office rent.
At one time, Jones maintained a Manhattan branch but failed to make it work because of the prohibitively high New York rent, Rahal says. Now, in Boston and Chicago, it is test-piloting multiple FAs sharing space, though not practicing jointly.
In big-growth markets, Jones is also making adjustments to its well-known face-to-face, door-to-door prospecting approach: Rather than popping in to visit potential clients individually, it has begun conducting seminars in high-rise buildings.
Coast to coast, the firm’s regional leaders are overseeing local recruiting teams and liaising with the home office to source candidates.
Dino Goegan, regional leader for the Phoenix metro region, with 47 FAs, hopes to add about five advisors this year. He reaches out by sponsoring events like charity golf games and open houses, and goes online in search of folks with appropriate resumes. When he finds someone interesting, he asks the local recruiting team to arrange a chat with him.
“I’m looking for people in their 20s to 50s with an entrepreneurial spirit and who have been consistently successful—people capable of building a business without anyone having to tell them what to do,” says Goegan, based in Chandler, Arizona. “You can teach people about investment products, but you can’t teach them a work ethic. And work ethic is what it really comes down to.”
Not unlike other firms, Jones, through its WINGS and BRIDGE programs, is making a concerted effort to recruit women and culturally diverse people of both genders.
“We recognize that women and culturally diverse individuals might have obstacles to bringing in new clients that a white male may not,” Rahal notes. To support female advisors, for example, the firm provides additional mentoring as well as leadership development.
Jones’ objective is to have 50% women advisors by 2020. Right now, only 18.5% are female. Last year, of the 3,000 FAs hired, 22% were women; 16% were culturally diverse. The latter currently represents only 9% of total FAs.
The welcome mat is out for recent college grads, under Jones’ Financial Advisor Career Development Program. Recruits work in the firm’s Tempe, Ariz., office for six months to a year, where they are licensed, trained (under an overhauled process) and assist in servicing clients.
“We want to polish them up a little and help them become the financial professionals we know they can be,” Weddle notes.
In the swing with social media, Jones is sourcing via Linked-In; Indeed.com, a job-search site; and other such portals. On LinkedIn, it contacts people whose profiles resonate. The brokerage is also trying to attract potential recruits through YouTube videos, online advertising, and national and local print ads.
Then there are the hundreds of career fairs it puts on, featuring “speed networking,” and hosting college placement officers in St. Louis to sell them on why Jones should get in front of their top graduating talent.
Final step in the hiring process is an audition: a four-hour simulated “day in the life” at Edward Jones. Conducted by third-party assessment-and-development firm Fenestra, it tests competences that Jones knows will lead to long-term FA success.
“We want to see if they do what they say they do. It’s a good filter,” says Goegan.
No such try-out was required, though, for veteran FA John Gunsett, 52, whom Jones heavily recruited for more than a year-and-a-half. Eventually, a handful of regional leaders and recruiters were wooing the advisor, a Wells Fargo bank broker at the time.
“I had a sizeable group of clients, and Edward Jones told me I was the main source of competition for them in my market,” says Gunsett, located in the tiny farming town of Van Wert, Ohio, population: 11,000. “They wanted me to come onboard and increase their market share.”
Though Gunsett had become increasingly disenchanted with Wells Fargo, the middle-aged FA thought he should stay put. Then, in a cost-cutting move, the bank eliminated his 14-year assistant’s job. At that, he phoned Jones and accepted their persistent offer. Not only did the firm hire him, it brought on his assistant too.
“It was better compensation, but that was a minor part of it. I felt that the grass was going to be greener at Edward Jones, and it turned out to be that way,” says Gunsett, who started on the job New Year’s Eve 2012. Now, he and his wife are happily gearing up for a July production-based bonus trip to Cancún, Mexico.
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