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Retirement Planning > Retirement Investing

Edward Jones’ Jim Weddle: Readying for the Future

By Ed McCarthy

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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.

We also have fashioned and designed what we call an RTP, which is a retirement transition plan where a veteran transitions the care of clients to their [the advisor's] successors, oftentimes more than one, who will continue the great service to the client and their household and their family.

It treats very fairly and treats appropriately the retiring veteran in terms of recognizing the body of work that they’ve built over a very long and oftentimes very successful career. It’s been received very positively. Most importantly, client retention through that transition process has been in the high 90s percentage wise, which means, I think, we’re executing on it pretty well. So, I think we’ve got a pretty good handle on that challenge.

The other piece of that demographic challenge, though, and I’ll describe this one as more of an opportunity, but it’s the generational transfer of somewhere between $30 trillion and $40 trillion of assets from the baby boomers to their millennial and Gen X kids. We have a tremendous opportunity and we’re working very hard on this but I’ll tell you, we’ve got to get better at understanding the family relationship, becoming familiar with and meeting and building trust in the inheriting generation.

You know, we’re great with working with mom and dad and we’ve prided ourselves on that. We understand, I think, the baby boomers exceptionally well but the millennials think differently, act differently, behave differently. They embrace technology differently. They define convenience differently.

Oftentimes they may want to meet face to face but they don’t want to come to the office so we’ll just connect up with them with a WebEx kind of terminal-to-terminal, face-to-face meeting and that seems to be their definition of what they’re looking for quality and service wise so, a very exciting opportunity. But, we continue to do a huge amount of research ourselves to better understand the future generations of our clientele and to build out what we believe will be valued by them, defined by them in the tools and the experience that they receive.

What do you see as the future of the full-service firm advisor-employee model, particularly in light of the continued growth in the RIA (registered investment advisor) model?

Every single one of our financial advisors is a full employee of Edward Jones. The independent RIA space has been, I think, driven by a couple things that might be changing. Number one, the complexity of the new regulations, which we’ve already discussed. It’s going to take a lot of resources.

It’s going to take a lot of support to be able to serve the retirement-oriented investor going forward. The disclosures, the reporting, the risk, quite honestly, the liability that you’re taking on in that business, in my personal opinion, I wouldn’t want to be a small RIA or an independent broker of any kind and take that kind of risk on. That’s going to be very difficult.

Our firm has massive resources. We are very, very well capitalized. We have an incredible investment in our technology platform which is continuously being upgraded and I think that the resources of large firms will come to be much more greatly appreciated and valued going forward as we all work through the complexity of the new rules and the new regulations.

The other thing, though and this will sound a bit perhaps controversial [but in] my opinion, I think some of the migration from broker-dealer over to registered investment advisor has been a regulatory arbitrage. I think people are moving away from the very thorough and knowledgeable regulation of FINRA that’s brought to the broker-dealer community and they’re moving to the RIA model where the facts show [they] will be audited once a decade.

I suppose that has some appeal for people that are trying to not make as much of an investment in their supervision, in their compliance areas and whatnot, not that that makes bad people; it’s just not where they feel like they want to be spending their limited amount of dollars.

So, as I said, we dually license every individual here. We are overseen by both FINRA as well as the SEC and I welcome the SEC developing their capabilities to do a better job, more thorough job, more systematic job of overseeing the RIAs. I think that’s desperately needed.

What else might you share about the industry and your role in it?

Well, the only perspective that I have is my own and, of course, a little bit for Edward Jones. We just see an amazing opportunity going forward. I think the demographic opportunity that we have in front of us is as attractive today as it has ever been, perhaps even more so. It’s been estimated recently, I think I read in The Wall Street Journal that the average millennial, if there’s any such thing, will need between $1.6 million and $2 million of investable assets in order to retire and fund their retirement.

I think they’re going to need help in order to get to that point in time. Even being technologically adept, you know, that doesn’t make them do-it-yourselfers. They fully appreciate value, the assistance that can come from a knowledgeable financial professional. So, we’ve got a huge opportunity if we can continue to understand how they view value, how they would define service in an ideal client experience and I think we’ll be able to figure that out.

We’ve got an amazing opportunity and ours is really what I would call a noble profession. We help people accomplish amazingly important things, like sending the kids to college and living a comfortable, independent, dignified life in retirement and then leaving a legacy however you choose to define that for the family, for the community, for whatever is most important to you when you eventually pass.

We help people do those things and, especially thinking through the millennial workforce, that will be a bigger and bigger part of our firm and our industry going forward. Part of what we have determined through our research is important to millennials is the impact and the importance, the significance if you will, of the work that they do. What we do is significant. So, I’m very optimistic. I think we’ve got a wonderful, wonderful future in front of us.

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