Not your Dad’s Edward Jones

Edward Jones, the home to 19,000 financial advisors that’s known for its steady, one-man, one-office business model, is in the midst of a reboot.

Penny Pennington took over as managing partner from Jim Weddle in 2019, right before the COVID-19 pandemic forced financial advisors, along with the rest of the workforce, to operate out of home offices.

That wasn’t a problem for Edward Jones financial advisors, who for more than 100 years have set up operations in one-person offices, quite often in small rural towns where giant competitors like Merrill Lynch wouldn’t deign to go because wealthy clients live in cities.

The firm’s founder, Edward D. Jones Sr., opened the first office in 1922 in St. Louis.

For decades, Edward Jones’ culture was so enamored of its slow-paced ways that in 2001, then-managing partner John Bachmann told the Wall Street Journal that he hadn’t turned on his personal computer in at least four years and shunned the cellphone.

Leap ahead 23 years, and change, perhaps more than ever, is afoot at Edward Jones. Like its competitors, Edward Jones is a giant broker-dealer whose financial advisors are employees but who often leave for more lucrative areas of the business, like registered investment advisory firms or independent broker-dealers, where financial advisors typically take home a greater percentage of the revenue they generate.

Pennington’s plan for the firm is taking shape, and it includes more emphasis on profitable enterprises – and a much more diverse financial advisor workforce – which could bolster the bottom lines of both the financial advisors and the firm, a private partnership atop which Pennington sits.

The company’s decision in 2022 to give its financial advisors more flexibility to work in ways other than its tried-and-tested, one-advisor, one-office model is an indication of that change; the tactic has spurred more than 1,400 financial advisors, or over seven percent, to combine and work in bigger offices. Large teams are also more likely to stay put and not jump to the competition, another key theme at Edward Jones right now. It’s far tougher for a large group of financial advisors to move than a small one-man shop.

Edward Jones, known to target the mass of affluent and small-town investors, is quietly guiding its financial advisors to go upscale and chase wealthier clients. The firm is putting cash on the table for advisors who are seeking to improve their credentials for clients in this area and reimbursing them for the cost of seeking certifications offered by the Investments & Wealth Institute, which touts itself as a premier gatekeeper for financial advisor certifications.

And Edward Jones is getting sick and tired of watching its financial advisors walk to the competition, a reason that’s at least partially motivating the change in Pennington’s strategy, one senior industry executive says.

“The firm is getting more aggressive in litigating its non-solicitation agreements with advisors who leave for another firm,” said the executive, who spoke confidentially to InvestmentNews about Edward Jones. “They are taking the posture they won’t be a feeding ground for independent broker-dealers or RIAS, and have changed the business model to what’s rare in this industry – a captive organization – and are working to strengthen that to hang onto their financial advisors.”

“For a number of years, Edward Jones ended up looking like a wirehouse, as a training ground for independent firms, but that won’t be the case going forward,” the executive said. “It’s really beefing up internal offerings that the advisors can use or sell to the public. That means better technology and products, while modifying the model to make themselves more palatable to FAs, like using teams.

“One broker sitting in a strip mall in a rural town is history,” the executive added.

Edward Jones is also looking to spread the wealth, according to a company spokesperson, and speeding up the process for financial advisors to participate in the partnership.

The firm, which currently has about 34,000 limited partners, is expanding its limited partnership opportunity with plans for annual partnership offerings to eligible financial advisors who haven’t previously qualified.

“Historically, the firm’s main limited partnership offerings have taken place approximately every four years,” the spokesperson wrote in an email. “The firm’s new planned [limited partnership] offerings will recognize the achievements and contributions of financial advisors who meet the eligibility requirements in years following a main partnership offering.”

And the partnership is the home of the profits at Edward Jones.

“Giving our financial advisors who share in the work an opportunity to share in the profit is a core tenet of our partnership structure,” wrote Don Aven, principal for talent acquisition at Edward Jones. “It allows us to remain competitive – both retaining and attracting the very best talent to serve our clients, colleagues, and communities.”

One component of the changes is a more diverse financial advisor workforce at Edward Jones, which in 2021 settled a racial discrimination lawsuit for $34 million.

According to the firm’s 2023 annual report, at the end of last year, 10 percent of its financial advisors were people of color, and 23 percent were women. The goal is to increase those numbers by 2025 so that 15 percent of financial advisors at the firm are people of color and 30 percent are women.

Meanwhile, change can also be discomfiting for some financial advisors, noted another senior industry executive, citing Edward Jones’ recent effort to have a more centralized financial planning process for clients that takes the work out of the hands of the advisor.

“When Jones started consolidating financial planning, a whole bunch of FAs got hyped up,” said the executive, who also asked to speak anonymously. “The home office took over the planning, instead of letting the advisors do that.”