If it is eyebrow-raising that in 2017 national broker-dealer Edward Jones became the firm with the most financial advisors industrywide, consider their aggressive, revamped recruiting strategy: Best known for hiring inexperienced folks as trainees, Jones is now focused on recruiting established advisors from competing firms — including wirehouses Merrill Lynch, Morgan Stanley and Wells Fargo.
In 2017, the BD recruited 212 experienced FAs, a 50.4% year-over-year increase from 2016’s 139, says Katherine Mauzy, principal responsible for Jones’ experienced advisor recruiting strategy, in an interview with ThinkAdvisor.
The firm’s proactive sourcing approach has resulted in the brokerage’s ranks growing to 15,952 FAs, according to the 10-Q quarterly report the company filed with the Securities and Exchange Commission at the end of November 2017.
As of Jan. 4, that number has increased to 16,000 advisors, according to a firm spokesman. The firm now has more than $1 trillion in assets under care, Mauzy says.
Jones’ goal is to expand to 20,000 advisors by 2020. It has nearly 3,000 more FAs than in 2014.
Based on headcount, at the end of Q3 2017, the firm had edged out former largest BD Morgan Stanley by 193 advisors. The wirehouse had 15,759 FAs, a spokesperson says. According to its Q3 2017 report, Morgan employed 97 fewer advisors versus a year earlier.
Industrywide, as of year-end 2016, total FAs came to 311,223: 47,029 at wirehouses and 40,389 at national and regional BDs, according to Cerulli Associates.
Jones’ advisors with an established practice have an average client asset level of $102 million. These FAs’ average production comes to $551,000.
But the firm is still not approaching Morgan Stanley in either asset gathering or production. According to supplements to its Q3 2017 earnings report, Morgan’s FAs’ “average client assets” are $146 million, with yearly fees and commissions averaging $1.07 million. Total assets for the wealth management unit were $2.31 trillion, more than double that of Jones.
At Merrill Lynch, the salesforce is growing: In Q3 2017, it added 296 advisors, according to supplements to its Q3 earnings report. But in the third quarter, average fees and commissions fell to $994,000 from $1.04 million per advisor in Q2. Veteran FAs, however, saw a slimmer decline: $1.30 million from $1.35 million. Total assets amounted to $2.2 trillion; Jones has about half that amount. Assets under management average approximately $150 million per advisor.
Citing company policy, Morgan Stanley and Merrill Lynch media representatives would disclose no further details.
Mauzy, formerly director of field recruiting and retention strategies at UBS, where she forged a 20-year career, joined Jones in 2010 and was named a principal two years later. She is now responsible for building the experienced-advisor channel and for the firm’s transition and integration team.
Likely accountable for much of the recent advisor attraction to Jones is the BD’s boosted FA compensation package, which provides a higher base salary with an income guarantee based on a percentage of experienced advisors’ trailing 12 months’ gross production. It also has a revised incentive-bonus program. Further, FAs have the opportunity to become a partner of the privately owned firm.
Jones was indeed in need of redoing its recruiting approach, which had relied chiefly on existing advisors drawing from their pools of friends, relatives and acquaintances. Right after the financial crisis, in 2010, it netted only one new advisor.
That was when the firm launched a talent acquisition strategy and when Mauzy came on board, soon running FA acquisition in the Central division. Still, in 2011, the firm’s FA count declined by 325. Two years after that, Mauzy was named leader of the experienced FA transition and integration team.
In the interview, she discusses the ideal EJ recruit and the firm’s success in hiring more female advisors. Jones aims to be the first brokerage to employ an equal number of male and female FAs. Through November of this year, 19% of its advisors are women, totaling 2,927, an 8% increase over 2016.
Attending the company’s annual Women’s Conference Feb. 21-23 will be Jones’ top 250 female FAs, along with women from competing firms, invited to meet management.
ThinkAdvisor recently interviewed Mauzy, on the phone from Jones’ St. Louis, Missouri, headquarters. The recruiting specialist, who also heads marketing for FA talent acquisition, did not hesitate to mention a big selling point, from Jones’ perspective: Every advisor is a solo practitioner — the firm has a no-teams policy — which, she says, makes for “a sense of independence” but also provides the support of a Fortune 400 company. Here are excerpts from our conversation:
THINKADVISOR: I’ve sometimes wondered why, since Edward Jones is consistently ranked by Fortune Magazine as one of the “100 Best Companies to Work For” (No. 5 this year), more FAs don’t join the firm.
KATHERINE MAUZY: The trend is turning. We now have the largest number of financial advisors in the industry.
Why have they been moving to your firm?
We designed our entire strategy around recruiting experienced advisors by using an industry perception [ad] campaign because advisors sometimes had a dated perception of Edward Jones. They didn’t realize the size, capabilities, resources and technology.
Anything else you did to rev up recruiting?
We built a team across the country not only to help recruit experienced advisors but to ensure that we have a world-class due diligence process: We have a team responsible for helping advisors transition to our firm.
But is your success in hiring veteran advisors largely because of the change you made in compensation structure?
Our compensation is very transparent and fair. We look at people’s trailing 12 months’ production, and they get an income guarantee. That means they know their income will be the same as the previous year [at their former firm]. Of course, they can earn more than that if they happen to do more production. They also get a new-asset bonus for every new client they transfer to Edward Jones.
What else has attracted experienced advisors?
The concept of being a partnership. To be owners in a firm and what that can mean to their families and for their retirement is really powerful. Also, they love the idea of the autonomy of having their own office — the appeal of independence within the firm.
Edward Jones doesn’t offer an upfront signing bonus. How does this affect recruiting FAs from other firms?
That [practice] doesn’t fit with our culture. What’s really great is that there are no handcuffs. If, for any reason, the advisor isn’t happy, they can leave and not owe the firm any money, which is different from the traditional employee forgivable loan [arrangement] at most firms. Here, advisors are rewarded for moving their practice and doing the work.
In the past, some brokers alleged that the firm gave them a rough time when they left the firm. Have you changed your policy when it comes to exiting FAs?
There are no changes in policy.
How does Morgan Stanley, UBS and other firms leaving the broker protocol affect Edward Jones?
We don’t see that as changing anything for us. We’ve not been a member of the protocol and have been very effective in bringing over recruits and their clients if they’re a fit for us and if [the FAs] follow our guidelines. We’ll continue to do things the way we have and absolutely anticipate that the number of recruits will continue to grow.
Who is the ideal Edward Jones recruit?
Obviously, client interests have to come first. We do our due diligence to understand the advisor’s book of business and make sure it’s a cultural fit for us. We’re looking for established professionals but also those who want to take their practice to the next level. We’re looking for $30 million to $150 million in portable assets. But they certainly can have more than that. When acquiring practices, we do look at assets under care. And we want to make sure the advisors have deep relationships with their clients.
How successful have you been in recruiting more women advisors?
We want to be the first firm to have parity amongst male and female advisors. Right now 19% of our advisors are women, and that’s certainly higher than any of the wirehouse. The momentum here is growing. [A Cerulli Associates report released in January 2017 shows that 16% of FAs industrywide are female.]
A study you conducted during your Women’s Conference in February 2017 found that female FAs weren’t particularly worried about the impact of robo-advisors. Only 3% said they were.
Most of our women advisors understand the value proposition that they offer clients, which is more about getting to know them and their needs, goals and aspirations — building that trusted personal relationship. Robos aren’t able to do that. The women are extremely confident in their ability not to be replaced by technology.
How are you progressing in recruiting racially diverse advisors?
We really, really want our financial advisors to reflect the community where they reside, and we also believe in the power of diversity of thought. So we have a strong focus across the board to increase the number of Hispanic, Asian and African-American advisors. We have that opportunity, just like the rest of the industry.
Are you still interested in hiring new college grads?
Yes. Our Financial Advisor Career Development Program is geared to anyone who has less than five years of professional experience, including people who are right out of school. That’s a strong focus for us.
Where do millennials fit on your recruiting agenda?
Millennials aren’t so young anymore, right? It’s a very broad swath now. The program I just talked about offers a great opportunity for them. When you think of the upward end of millennials [age-wise], they’re oftentimes career changers or else have ended up somewhere on an [advisory] team. The better opportunity would be to have their own practice at Edward Jones.
Your firm’s model is the solo practice. I imagine that many folks wouldn’t like working in an office by themselves.
A lot of people say that to us because they love to visit with other people in their office. The reality is that we’re a very large firm with anywhere from 40 to 60 financial advisors in each region, who get together to share best practices and ideas, and go on social outings. There’s a lot of real positive camaraderie.
Would the firm change from the solo advisor model?
We have multimillion-dollar producers able to deliver the ideal client experience without forming a big team. Not everybody wants to manage a bunch of people. We think that most advisors would be happier with our model.
Managing partner Jim Weddle told me in an interview for Research magazine in 2014 that Jones intended to open branch offices in populous cities like New York and Chicago. Have you done so?
We’ve had exponential growth in major metropolitan areas — the big metro markets — including Dallas, Southern California and Chicago. We’re continuing to grow in those markets because they offer a great client opportunity. Often there’s also a lot of diversity opportunity for us to grow the number of our advisors.
Mr. Weddle said you once had an office in New York City but because of prohibitively high rent, closed it. Any plans for a Manhattan presence?
We serve quite a few clients in New Jersey, on Long Island and in Brooklyn. However, I don’t know whether New York City real estate costs would make sense for us to have an office in Manhattan. But you never know!
In the interview, Mr. Weddle stressed that “recruiting advisors is critically important. We are simply not large enough.” What about now?
Jim is right: Growth is incredibly important to our firm. We can always get better at it, right? The environment changes, technology changes, competition changes. So making sure we’re ahead of all that will be very important as we go forward.
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