Edward Jones CEO raises bar for advisers

NEW YORK Fri Jun 3, 2011 11:34am EDT

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NEW YORK (Reuters) - Edward D. Jones, a sprawling brokerage firm with a Main Street customer base, is adopting some hard-hitting Wall Street strategies in an effort to expand its customer base.

James Weddle, managing partner of the St. Louis-based partnership, is raising production minimums, soliciting experienced advisers and pursuing more affluent clients in big cities. It's a shift for the 89-year old firm, which has been hitting roadblocks on its typical path of increasing revenue and its brokerage force by 10 to 12 percent a year.

"We're not right-sized to meet the demands of the marketplace," Weddle said in an interview devoted to changes he's initiating in hiring strategies and productivity tools.

(To view adviser and revenue growth since 1982, click on r.reuters.com/kyh89r.)

Edward Jones has built its string of 11,000 small offices by hiring and training salespeople, teachers and other career-changing professionals to sell mutual funds, annuities, stocks and plain-vanilla bonds. Most of its offices are in rural and small-town locations, and are staffed by a single broker and an assistant.

RAISING MINIMUMS

Brokers who have been with Jones for five years or longer now have to generate at least $20,000 a month in gross revenue--up 11 percent from the previous minimum--or risk being put on review.

The new requirement still trails that of larger brokerage firm rivals. Merrill Lynch, for example, requires brokers with six or more years of experience to generate at least $299,000 of annual revenue or risk greatly reduced payouts.

Merrill's brokers, based on first-quarter results of its parent, Bank of America, are on target to produce average revenue of $931,000 this year, according to parent company Bank of America. The average 12-month gross revenue of Jones' advisers as of the end of May was $277,144.

A Jones spokesman said its production averages have been weighed down by the high proportion of new advisers who are building their practices from scratch.

Weddle, who took the top job in 2005 after heading Jones's branch system, has begun a targeted effort to pursue experienced brokers from rivals, a new arrow in the Jones recruiting quiver.

The effort is led by a small team of internal recruiters who are hoping to hire 100 to 150 advisers this year. They also are trolling for advisers who can open offices in large cities.

"We're a long way from catching up," said Weddle, though he sees signs of progress.

About 85 percent of the firm's more than 11,000 brokers are now meeting the minimum production standards, compared to 79 percent who were failing the less rigorous target last year. Jones, like many firms, offers extra training to advisers who fail to meet the standards.

Jones terminates advisers who do not achieve sales goals after the extra attention, but also has been losing a growing number of advisers who appear unhappy with the new strictures.

DEPARTURES

In 2010, 553 Jones advisers left for other securities industry rivals.

Weddle says he considers the number acceptable, since only 79 of those who left were generating profit for the firm. However, he concedes that recruiting in general has become tougher, including from the company's traditional pool of candidates who are changing careers.

He blames that in part on the 2008 financial crisis and the ensuing economic downturn.

"In 2009, and even in 2010, there weren't many people willing to take the risk of leaving a good job," Weddle said.

Jones' brokerage force has increased by half since 2002, but as of March 30 was down 2 percent from a year earlier.

Weddle said he is confident about his new strategy, which he expects will generate "healthy" revenue growth of 5 to 10 percent a year.

"We will grow advisers to help us achieve our most important goal, which is serving more clients," he said.

Jones added 37 advisers in May, and in the first four months of the year attracted $9.2 billion of net new client assets.

The firm advises 8 million clients who have more than $611 billion of investable assets, the highest total in its history.

"Our pipelines are growing in number and quality, which is very encouraging," said Weddle.

Jones's new strategic plan does not have specific growth targets for advisers or branches, the company said. Weddle--who joined Jones in 1976 as its 200th adviser--says adding branches has waned in importance as a success measure since his early days.

"Back then, we needed to grow our relevance and our ability to compete," he said. "With 12,000 financial advisers we can compete with anybody. I'd like to see us grow at the right pace."

(Reporting by Joseph A. Giannone; editing by Jed Horowitz)

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