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Financial Planning > Behavioral Finance

Edward Jones’ Top Exec: How the Firm Is Managing Pandemic, Boosting Diversity

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On March 17, America recorded 6,135 COVID-19 cases and 112 deaths. The states were starting to shut down. On that day, Edward Jones closed its 15,356 branch offices in the U.S. and Canada to clients and prospects.

Now, three and a half months later, the firm, which serves 7 million clients, has reopened about 7,100 branches. But citing coronavirus concerns, about 25% of advisors who work in these offices are still restricting access to the public, Jones’ managing partner, Penny Pennington, tells ThinkAdvisor in an interview.

During the company-mandated shutdown, most FAs remained working in the branches — “safe places,” since only two to four people occupy each one, the space therefore hospitable to social distancing, Pennington maintains. Other Jones advisors had opted to work remotely from home.

For some 15 weeks now, Pennington, appointed to the firm’s top post in 2018 when longtime managing partner Jim Weddle retired, has led the company through what she calls a “triple pandemic”: “the coronavirus pandemic, the financial pandemic” and nationwide racial protests that began at the end of May, which she frames as “a social-unrest pandemic.”

Addressing racism, diversity and compensation inequity, Pennington on June 15 announced a five-point commitment to increase the firm’s efforts to employ a more diverse advisor and home office workforce.

At present, only 8% of Jones’ 19,161 FAs in the U.S. and Canada and 9% of senior leaders in the home office are people of color. The firm employs 49,000 associates: FAs, branch office administrators and home office staff. Industrywide, the proportion of FAs of color is 8% as well.

“We commit to continuing racial-equity training and anti-racism personnel policies” and to “continuing to work toward a meaningful increase in diversity among … financial advisors and senior leadership,” the Commitment states.

Further, the St. Louis-based firm, with $1.2 trillion in assets under management, has invested $1.2 million in the National Urban League and the St. Louis Urban League, according to the Commitment.

In the interview, Pennington argues that Jones “hire[s] more black financial advisors than other firms do.” She stresses that “the white majority that’s quote-unquote in power right now has to … co-create the future from the standpoint of people who have been living the reality of … inequity and racism.”

As for the present, the firm is in litigation defending a class action lawsuit alleging racial bias, which was brought by black advisor Wayne Bland and three other FAs in 2018.

Pennington declined to comment. A company spokesperson wrote in a statement: “Edward Jones has denied the allegations in the lawsuit … and in response … has filed motions that are pending before the court … Edward Jones does not discriminate against black financial advisors, nor does the culture of our firm condone racism in any form.”

In 2016, a Latino advisor, Emilio Lira, filed suit against Jones, alleging discrimination. The action was dismissed. In January 2020, the FA charged in another suit that he was fired because he previously sued the firm over discrimination.

“Mr. Lira’s employment was terminated for legitimate and lawful reasons that had nothing to do with his filing a lawsuit,” the spokesman wrote. “Edward Jones denies the claims of retaliation Mr. Lira makes … and has responded accordingly in court.”

Pennington started at Jones as a financial advisor in 2000 after a high-level career in bank management at Comerica and Wachovia. At Jones, she became a principal after six years and then continued to rise quickly through the ranks.

ThinkAdvisor interviewed her on June 29. She was speaking by phone from St. Louis. Some of the conversation was devoted to Pennington’s optimistic forecast for the economic recovery and a report that Jones advisors were prospecting hard even though knocking on neighborhood doors — long their traditional mode — is out of bounds because of social distancing. So, for now, Jones has joined the club with virtual prospecting, the wave of the present.

Here are highlights of our interview:

THINKADVISOR: Why does the industry have so few Black and brown financial advisors? Is it because clients prefer not to hire advisors of color?

PENNY PENNINGTON: The industry has a weak tradition of being more white than anything else and, apparently, not appearing as a place of belonging for talented folks who come from different backgrounds and experiences.

Any other reason?

There’s also a very real racial wealth gap in our country — inequality in terms of wealth distribution. Getting professional financial advice to folks with different means and opportunities is what our industry needs to be focused on. It’s that confluence of issues and opportunities that we have to take action on.

Only 8% of Edward Jones’ 19,161 financial advisors in the U.S. (18,221) and Canada (940) are Black and brown. It’s the same proportion industrywide. Is your firm on track for growing the amount of advisors of color?

We’ve grown that number over time. Are we on track? We believe that we have significantly more opportunity [room to grow]. We believe that we hire more Black financial advisors than other firms do. But we want to see more people of color, and women, become our advisors.

What prompted you to announce, on June 15, the firm’s five-point commitment addressing inclusion, diversity and equity?

It’s an actionable statement of what we intend to focus on as our next step and what we want to be held accountable to. We’ve been very actively focused on diversity and inclusion for well over a decade, seeking out diversity in our financial advisor population as well as in our home-office population. The five-point commitment is a dialing-up of that.

Some African American advisors I’ve interviewed say that the impetus and policies for advisor diversity must come from senior leadership. Do you agree?

It’s essential. If senior leadership isn’t focused on that, it won’t happen. I’m growing my understanding of racism, racial inequity and structural inequity just as I grew my understanding of the coronavirus [issues]. The white majority that’s quote-unquote in power right now, has to increase their understanding and co-create the future from the standpoint of people who have been living the reality of that inequity and racism. That’s what business leaders have to pledge.

What’s been the biggest challenge leading the firm since mid-March?

We’ve had the coming-together of a triple pandemic: a health pandemic, an economic pandemic and a social-unrest pandemic. That’s what’s been so different. The most challenging part — also the most exhilarating — is that there’s nowhere to look for validation about whether we’re doing it right in terms of our responses and how we’re handling things.

On March 17, you closed the branches to the public but kept them open for advisors. How did that go?

For the most part, our advisors and branch-office administrators have remained in the branches, which are safe places because [in each] we have [only] two to four people, who can distance from one another effectively.

Alternatively, have advisors been allowed to work from home?

We enabled any branch team member to work remotely. They can work flexibly from the branch or from home. The advisors have been meeting with clients virtually. We’ve always had very strong virtual capabilities; and for the past 10 weeks, those got dialed up.

Are you reopening any branches to the public right now?

We’re in the process of reopening the branches to the public for scheduled appointments with clients and prospects. Around 7,100 of our branch offices have reopened to the public. [But] for about 25%, the [advisors] are working so well virtually and are concerned about their own health and that of their clients that they’re choosing not to open to the public right now.

What’s your policy about permitting advisors to work remotely on a permanent basis?

For several years, our advisors have been able to work from home virtually. However, the role of branch office administrator — client service professional — is in the branch. We’ve enabled these [employees] to work flexibly [from home] through this crisis. We don’t have an end date but expect that over time, we’ll have most of them continue to work in the branches. 

What’s guided you regarding when to reopen the branch offices?

Our own guiding principles. We penned the [updated] version of our guiding principles on March 17, and that’s guided our actions ever since.

Edward Jones has traditionally prospected for clients face-to-face, knocking on doors in particular. Since that’s not been an option during the pandemic, have the advisors put prospecting on pause? 

They’re definitely seeking prospective clients, and our data tells us they’ve been very effective. I’m hearing tremendous success stories. At a time when most folks are, perhaps, more anxious than they’ve been for years, they’re looking for advice and to ensure that the relationship they have with their financial advisor is meeting their needs. Our advisors are doing virtual networking and virtual coffee chats [among other ways to get together].

Have you held seminars, too?

Yes. From the very beginning of the pandemic, we found that clients — current and prospective — wanted to talk to us about their physical health, their emotional well-being and their financial status, and then get information about the CARES Act and stimulus packages.

What does reopening the economy really hinge on? The virus’s spread? State governors’ decisions? What really dictates when states and cities should reopen for business?

The [virus spread and governors’ decisions] go together. The other factor is how confident people feel about being in pubic and in parts of the economy that require them to be face-to-face [as in stores].  We’re seeing vis-à-vis stock market performance that consumers are spending. But there are certainly parts of our economy that are going to take a longer time to recover, like travel and airlines. However, the forward-looking stock market tells us that there are segments that are continuing to perform very well.

What’s your forecast for the recovery, then?

We’re definitely in recession territory, which we’ll begin to come out of as economic vitality picks up in the fourth quarter. Everything depends on the economy’s reopening. The experiences we’re having right now, where localities are reopening and then seeing a resurgence of the disease and having to close again, are going to continue the uncertainty about the recovery’s [configuration]. But we’re optimistic about the fourth quarter and moving into 2021.

You’ve said that one of your overall goals is to drive change to clients. What sort of change?

We want to enliven clients’ ability to get valuable advice from a human [FA] with a long-term orientation who’ll create a plan to achieve a complete set of financial goals for the future. We’re seeking to do what machines can’t do. It comes from a place of love and helping people have better futures for their families.

Will you be combining that with more or improved technology?

We’re embarking on a transformative digital acceleration strategy, which supports our journey to human-centered complete wealth management. Our industry is on a journey from product orientation and a, sort of, obsession with investment management and performance to focusing on families and the outcomes they most desire across a complete set of goals. That’s what we’re focused on.

In reading your “Five Points,” I saw that you used the word “empathy” a few times. Many financial advisors need to work on raising their level of empathy. Why is that important?

Isn’t empathy what it’s all about? We know that if our clients feel understood, informed, in control and secure, they have a much higher chance of having a better future. Over the past several months, the empathetic conversations we’ve had with our clients and one another have [produced] a new kind of possibility in terms of relationship-building. Empathy is where we have to start [in order] to make a difference in people’s lives.

You had a 16-year senior-management career in banking before you became a financial advisor at Jones in 2000. Why did you make the switch?

I wanted an opportunity to impact people. Being part of this opportunity-and-development factory that is Edward Jones — as my predecessor Jim Weddle called it — has helped me have that kind of impact and ability to make a difference in people’s lives.

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