MS Morgan Stanley

By Lisa Beilfuss 

Client assets at Edward Jones have surpassed $1 trillion, the regional brokerage said, as it competes in recruiting against Wall Street titans like Merrill Lynch and Morgan Stanley.

The St. Louis-based brokerage, known for its thousands of storefronts across the U.S., is pursuing clients in urban centers that have traditionally been the domain of the biggest brokerages. And the privately held firm is pushing to beef up its broker ranks by recruiting experienced advisers from rivals, as larger competitors pull back on some costly recruiting practices.

Market gains in recent years have helped account balances grow at Wall Street firms, asset managers and regional brokers, but this year net new assets account for about half of overall client-asset growth at Edward Jones, said Jim Weddle, head and managing partner.

Assets under management now stand at $1.06 trillion, up 9.9% from the start of the year. Net new assets increased by $30.9 billion through August, he said, on track to hit the firm's $47.1 billion target for net new assets in 2017. "We are not confusing [asset growth] with a bull market," Mr. Weddle said.

For nearly a century, Edward Jones relied on career changers and new college graduates to expand its broker ranks. Now, with a plan to field 20,000 brokers and push deeper into cities such as Chicago, Boston and Dallas, where its rivals are entrenched, Edward Jones is looking to attract experienced brokers from big-name shops.

Of the roughly 700 brokers the firm has hired this year, Mr. Weddle said about 130, or almost 19%, are from other firms. That compares with roughly 40 experienced advisers Edward Jones brought in last year. Mr. Weddle said he expects to hire up to 200 more advisers by the end of 2017, translating to 6% growth in the overall adviser count to about 16,000.

Merrill Lynch's adviser force stood at about 15,000 at the end of the most recent quarter. Morgan Stanley has roughly 16,000 financial advisers.

Big U.S. brokerages Bank of America Corp.'s Merrill Lynch, Morgan Stanley and UBS Group AG have in recent quarters pulled back on paying big bonuses to lure brokers from rivals -- a costly and long-bemoaned recruiting practice known as "prisoner exchange" -- in part to comply with a new retirement-savings rule that requires advisers to act in clients' best interest. The poaching could potentially lead to problems for firms under the rule, because it in part mandates "reasonable compensation."

This pullback on poaching has given Edward Jones an opening to lure smaller-revenue producers from firms including Merrill Lynch. While the bonuses pale in comparison with the multimillion-dollar checks often commanded by veteran brokers who join the biggest brokerages, they come as rivals have scaled back hefty recruitment deals and redirected much of the money to retention.

The recruiting retrenchment at big firms "is an opportunity for a firm like Edward Jones to compete," said Mindy Diamond, president and founder of Diamond Consultants, a recruiting firm for financial advisers. "The playing field has been leveled," she said, with some veteran brokers now within Edward Jones's reach.

How far into big-city markets Edward Jones can reach remains to be seen. "They have a better shot now than they had a year ago," Ms. Diamond said. "Edward Jones appeals to a very niche kind of financial adviser," typically someone who isn't in a major city, she said, and so the firm isn't a "major player" when it comes to recruiting.

Edward Jones said it continues to focus most of its recruitment efforts on career changers and younger advisers. Part of that push is centered on drawing women into an industry that leans heavily toward men. Monica Giuseffi, head of inclusion and diversity at Edward Jones, said the firm has been hosting cocktail receptions and dinners around the country to pitch careers at the firm. Ms. Giuseffi said the firm will hold about 40 such recruitment events this year, up from 24 last year.

(END) Dow Jones Newswires

October 16, 2017 05:44 ET (09:44 GMT)

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