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Top IBD Read: Edward Jones Appeals to Wirehouse FAs (Nov. 17)

By Thomas Coyle December 30, 2016

When news broke in November that Edward Jones was luring wirehouse advisors, it became the most read story by indie broker-dealers.

In November, Edward Jones said it was having more success than usual pulling advisors from the four wirehouses.

The main reason? Some junior advisors at these firms — Merrill Lynch, Morgan Stanley, UBS and Wells Fargo — have grown impatient working in teams, according to the St. Louis-based super regional, which is known for hiring mid-career job changers from outside financial services.

“Big teams sound glamorous but they create a lot of complexity,” Edward Jones’ branch-development chief Katherine Mauzy says of one force propelling wirehouse FAs her firm’s way.

Long-term, this complexity shows up as impediments to advancement for less-seasoned team members, according to Mauzy. And on a daily basis, she adds, confusion and delay can set in as team-bound FAs compete for scarce support-staff resources.

But Edward Jones, most of whose 14,000 U.S. advisors work in one-broker offices, supplies every FA with his or her own dedicated assistant — who, like the FA, is on the company payroll. And that’s an on-site, flesh-and-blood helper, not a “virtual” assistant or an interchangeable service-center drone.

“That you get your own assistant is a big attraction” to some ex-wirehouse brokers, says Mauzy.

Another reason some ex-wirehouse brokers jump to Edward Jones is its perception in the job marketplace as a “nice hybrid between the wirehouse and independent worlds” in a period of “migration away from the wirehouses,” says Mauzy, who joined the firm in 2010. “You get the autonomy of running your own business with the robust resources of a Fortune 500 firm.”

In an accelerating trend going back 20 years, independent financial advice practices have grown – seemingly at the expense of wirehouses – at a faster pace than any other financial advice channel.

From 2007 to 2015 RIA assets saw a 119% jump from $1.3 trillion to $2.8 trillion, according to the consulting firm Aite Group. Meanwhile, the four wirehouses increased assets by just 12%.

So far in 2016, Edward Jones says it has recruited about 120 ex-wirehouse producers. That’s double its usual yearly pull from that channel.

Edward Jones isn’t chasing wirehouse teams or big solo practitioners, however. Though it offers incentives in the form of partnership opportunities to tenured top producers, the firm has no interest in competing for heavy hitters — certainly not if it means offering big signing bonuses or complicated deferred-comp packages, says Mauzy.

A better wirehouse fit for Edward Jones is an FA with three to six years of experience who is looking to build his or her book of business — typically with about $120 million under management — in a solo practice, she says.

Some of these former wirehouse advisors turn to Edward Jones – a brokerage closely associated with small-town America – as a way to work in more laid-back communities, according to Mauzy.

But she’s quick to add Edward Jones’ growing presence in national and regional financial hubs is another reason for the firm’s recent success with ex-wirehouse brokers.

For ex-Merrill advisor Michael Fessler, Edward Jones provided a chance to complete a transition out of a team.

To be sure, the Oregon City, Ore.-based FA had left the Merrill team he’d been with before Edward Jones came courting.

“We’re still good friends,” Fessler says of his former Merrill partners. In fact, he stayed in the same small office with them after he’d moved into solo mode. “But I felt like less of a teammate and more of an asset gatherer for them.”

That said, it took a new owner, the passage of time and a nudge from a firm he’d barely considered before to dislodge him from Merrill, where he worked for 10 years starting in 2002.

“I liked where I was,” says Fessler. “And Merrill of course is a great brand.”

But in his mind, Bank of America’s takeover of “Mother Merrill” in 2009 proved disruptive.

“It took a few years to become really clear, but being owned by a bank changed how the business was run,” says Fessler. He was especially irked by pressure to cross-sell bank products and services to his brokerage clients.

Fessler was in fact looking into starting an RIA when Edward Jones came calling.

Michael Fessler

“Everybody knows Jones,” says Fessler. “The name at least, but I didn’t know anything about the platform.”

On learning about Edward Jones’ support for fee-based service, Fessler now describes its investment and client-service infrastructure as “one of the best-kept secrets in the industry.”

Four years after joining Edward Jones — and doubling his book to about $100 million — Fessler considers the move “by far the greatest business decision I’ve made.”

In sum, Fessler says the ideal wirehouse candidate for Edward Jones “is an independent-minded individual who wants to be a boss and run an office the way they want.”

On the compliance front, Fessler says Edward Jones’ recent decision to allow its advisors to charge for trades on retirement accounts through an exemption to a broader fiduciary standard set to take force in about five months won’t have much impact on him.

“I have some business in 401(k) plans, but not much,” he says.

But Edward Jones is quite “prepared for the DOL,” Fessler adds. “They’ve kept us up on what’s been going on and what to expect from the very start, while putting the tools in place for us to succeed in a DOL environment.”

Read the original article, published November 17, here.