Mass exodus at Edward Jones

Rep flight may signal changing culture

Jan 26, 2004 @ 12:01 am

By Bruce Kelly

Unprecedented growth at Edward Jones over the past decade has accelerated a shift in culture that pushed as many as 1,300 brokers out the door during the first eight months of 2003, according to brokers who recently left the firm, and industry recruiters.

The brokerage industry is notorious for turnover among its registered representatives, but the departures mark a dramatic shift at St. Louis-based Edward Jones, which is known for employing brokers who plan to spend their entire careers with the firm.

Edward Jones, which has 8,133 individual brokerage offices in the United States, has long prided itself on its tightly knit culture, which has revolved around the firm's roughly 240 partners. And many brokers and recruiters clearly regard Edward Jones as an excellent firm, particularly because of its emphasis on training and the unique opportunity to work in a one-person office.

The company, however, is just not the same as it was a decade ago, according to industry observers and former Edward Jones brokers.

Brokers still kid each other about whether they have "drunk the Kool-Aid," a tongue-in-cheek comparison to cult leader Jim Jones and the firm's fervent following. But for some, the joke has lost its fizz.

"It's become more about the firm and less about the client and broker," said former Edward Jones broker Marc Tomberg, president of Indian River Investment Center in Vero Beach, Fla. His practice is affiliated with Raymond James Financial Services Inc. of St. Petersburg, Fla.

Last September, Mr. Tomberg left Edward Jones, a full-service broker, to join Raymond James' independent-broker-dealer network. He was a 10-year veteran with the firm and said he had been among the firm's top 5% of producing brokers.

Such brokers produce in the neighborhood of $500,000 in gross commission, Mr. Tomberg said.

focus on training

Bob Anderson, another former Jones broker now working for Raymond James in Vero Beach, agreed.

"When I first started with Jones in 1998, it felt li

ke I owned my own business. But over the last two to three years, the firm made it apparent that I was working for the general partners," said Bob Anderson, who left Edward Jones about a year ago.

"There was also a lot of pressure to take time away from my clients to help train new brokers," Mr. Anderson said. "The veteran brokers had a saying: `Ask not what Jones can do for you, but what you can do for Jones."'

An Edward Jones spokesman, John Boul, did not return phone calls seeking comment.

The firm's home office, which supervises the largest network of brokerage offices in the country, is spread thin, the former brokers and recruiters said. And that has resulted in Jones' squeezing its line of products to unreasonably narrow offerings as well as cutting payouts on a range of investment product management thought inappropriate for clients, these sources added.

To some, Edward Jones isn't keeping up with its competitors in a variety of areas.

The firm has no plans to offer a fee-based money management program for brokers, observers said. And its technology, which was state of the art in the 1980s, is simply not up to snuff.

The firm is also piling on fees for services, the brokers said.

The former brokers and industry recruiters said that the firm's changes have occurred over time. Extra demands of constant recruiting and training eat into brokers' time, and now play into determining bonuses, they said.

But most recently, one change at the top of the firm may have some brokers wondering more about the firm's direction.

Douglas E. Hill replaced the charismatic John W. Bachmann as managing partner this month.

The firm has a long-standing policy of recruiting and training a staggering number of new brokers, targeting 200 trainees each month. Mr. Hill has said he remains dedicated to building the firm.

In an interview last year in an industry publication, he said that Edward Jones was hoping to triple its sales force. "Our model works, and we will absolutely stay

on top of it," Mr. Hill said.

"How are we going to look when we have 25,000 investment representatives?" he added. "That's one of our challenges."

Courting veterans

It isn't clear how many brokers have left the firm since the beginning of 2003, but former brokers and recruiters said that more are looking to change firms.

One industry recruiter, who asked not to be identified, said a veteran Edward Jones broker with about $500,000 in gross commission had called him out of the blue this month to discuss changing firms. The broker complained about Mr. Hill's "micromanaging" leadership style.

Industry recruiters said that both high-producing veterans such as Mr. Tomberg and brokers with about half that production are being courted by rival firms. Those in the hunt include wirehouses such as Smith Barney Inc. of New York and independent broker-dealers such as Linsco/ Private Ledger Corp. of Boston and San Diego, and Raymond James Financial Services.

Edward Jones is particularly susceptible to losing its brokers to independent broker-dealers, some observers said.

The company's vaunted "one broker, one office" model is basically that of an independent broker-dealer, only with half the payout and a much smaller shelf of investment products.

"LPL has always done well with Jones brokers," the recruiter said.

Bill Dwyer, an executive director in Boston with LPL who oversees recruiting, declined to comment.

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