Edward Jones’ managing partner Jim Weddle joined the firm as an intern when he was studying for his MBA. Forty years later he oversees roughly 14,500 financial advisors in the U.S. and Canada with over $876 billion of assets under management. Research recently asked St. Louis-based Weddle about where his firm and the wealth management field are heading.
What are some of the biggest challenges facing Edward Jones today?
I think the biggest challenge for us is the biggest challenge for the industry and that’s the recently released Department of Labor [fiduciary] rules and regs requirements as we serve our clients who have retirement dollars to invest. [There are] lots of change there, lots of work needed to accommodate what’s being required. Come next April I have no doubt, no question whatsoever, we’re going to be ready, but we’ve provided some input, we had advised and recommended that the rules and the enforcement of the rules, the proof of putting the client’s interest first and what not, be a bit different than what was the final issue.
So we’ve got a lot of work to do, a huge effort, to be sure, but that’s the biggest challenge right now and we’ll get there. We’ve been working on this with a group of several hundred people for the last six months so we’ve got a good head start. I met with that group, got an update actually, a couple of days ago, and they’re making the kind of progress that we think is necessary and come toward the end of this year I think we’ll be in really good shape.
How do you see the DOL’s ruling affecting Edward Jones as a firm, more specifically?
I’d point out that we work with the client that we have defined in this way: it’s the serious long-term individual investor. We don’t do a lot of institutional stuff. We don’t work with a lot of huge pension plans and that sort of thing although [we work with] business owners if they have a qualified plan for their employees, we certainly love that business, but it’s the serious long-term individual investor that receives the greatest amount of our attention.
Those people invest with a purpose in mind. Oftentimes they go through kind of an evolution of objectives. If they have children, they want to put them through college so we help them very, very importantly with their educational funding and preparing for that. Once they get the kids into college and through college, then it’s time for mom and dad to start looking at how do we prepare to be able to retire on time or perhaps earlier and comfortably and independently for what could be a very long period of time in retirement?
You know, everybody is living longer and that’s a good thing. It’s not a good thing though if you outlive your financial resources. So, the preparation for retirement, living in retirement, all those kinds of things are important and that is obviously directly related to the Department of Labor.
So, maybe half of the accounts that we serve today are retirement accounts. They’re IRAs, they’re 401(k)s, they’re SEP-IRAs and that sort of thing and a very important part of our business, very important part of the relationship that we have with our clientele so it’s important that we get this right. It’s important that we continue to be able to serve those people and we will be able to do so.
It’s going to be expensive, though. And, for some firms that maybe are smaller or don’t have the financial resources that we do, it could be difficult for them. We see a clear path going forward though in terms of a lot of work, a lot of preparation but our ability to continue to work with clients and their IRA and their retirement dollars.
How might the DOL ruling affect Edward Jones’s advisors?
All of our financial advisors are dually licensed. The firm is a registered investment advisor. All of our financial advisors are both broker-dealer licensed and they are investment advisor licensed. So, they wear both hats today so that’s not a challenge. The licensing, the registration, the training and whatnot, that’s in place.
Our concern and our hope is that we’re able to continue — I’m still talking about the DOL — to serve all the clients that we currently serve today and continue to offer them the choice of how they compensate us for the work that we do. Whether that’s fee-based, which seems to be the preference of the Department of Labor, or whether it’s transaction-based, the more traditional broker-dealer kind of account model.
I believe that one size doesn’t fit all and some clients are better served and prefer to be served one way or another. I want to be able to offer both but I’ll also tell you, we haven’t concluded yet that we’ll definitely be able to do so or how it is that we’ll go about being able to do so. We’re working really hard on that and we’ve got some time yet and I’m still optimistic but a lot of work yet to be done.
What other challenges is your firm facing?
There’s a challenge and there’s also an opportunity and both of them have to do with today’s demographics. The demographics that I’ll speak to is the demographics of the financial advisor community. [In] the industry, I think it’s been reported that the average age of financial advisors is 57.
Well, it’s not 57 at Edward Jones; it’s closer to 50 but our firm also is one of the very, very few that successfully has grown over the years in an organic fashion. By that I mean we identify terrifically talented people with a great interest in being in the financial services business and we have an amazingly thorough and high quality training program, career-long.
We can take folks that have been attorneys and engineers and accountants and teachers and we can train them and then support them through the startup process and over a multiyear period of time help them to build a successful practice. That helps us to address the demographic challenge that the rest of the industry is wrestling with right now because the average age of the people in our training program is 37. We are with every training class averaging down the average age of our financial advisors. So, we feel like we’re in really, really good shape here.