When Korey Banks decided to quit his job at a South Carolina bank to become a financial advisor, it was because he was interested in investing. After passing his exams, he entered Edward Jones' training program.
"I will tell you that when I got my Series 7, I was so excited," says Banks, 37. "I was putting together all these stocks and different investments, and that was going to be my focus. Then, I went to the training, and I realized that it wasn't about that. You learn it's about the clients and their goals and risk tolerance."
Five years later, he oversees more than $80 million in assets from his office in Long Beach, N.Y., and the client relationship is the centerpiece of his workday.
On a recent spring morning, he fielded a call from a client, a retired entrepreneur, who was concerned about how conflicts overseas could affect his portfolio. "Every time someone burps in Ukraine, there's volatility," the client said. After Banks discussed his concerns and reviewed his risk tolerance, the client said he felt more comfortable and the two agreed to reconnect later.
Banks was then off to a lunch meeting with another client, who runs several local farmer's markets and is a key source of referrals. They didn't talk about particular investments. It was about touching base to see how she was doing.
The start of Korey Banks' career as an advisor is far from unusual. Edward Jones is hoping that by hiring and training advisors like Banks thousands of them that it can become a leading force in wealth management.
By 2020, the firm's leadership wants to field the largest advisor force in the industry: 20,000 advisors with $1 trillion in AUM.
Indeed, the ranks are already swelling at Edward Jones. In the last four years, the firm added nearly 2,000 advisors to reach 14,261, a figure which includes some advisors in Canada. That exceeds rival Merrill Lynch's total of 14,186 and far surpasses UBS' 6,997. But the firm still has a way to go to catch up to Morgan Stanley, which had 15,915 advisors as of the first quarter of this year.
Advisors at other brokerages are often surprised to hear these numbers. When did Edward Jones get so big? The St. Louis-based firm has done so organically. Edward Jones eschews hiring advisors from other firms, a common strategy pursued by the wirehouses and regional firms. Instead, it hires and trains individuals entirely new to the profession.
"We know we only have one significant source of revenue at our firm and that is the financial advisors," says James Weddle, managing partner and head of Edward Jones.
The firm's leaders acknowledge that expanding while maintaining the culture is a challenge, but they say they're maintaining that balance and, more important, meeting clients' needs.
If they hit their growth targets, Edward Jones will be a giant in the industry. And advisors like Banks may very well represent the future.
Edward Jones' training program is the critical component for achieving its growth plans. Last year, the firm hired 3,100 trainees, a spokesman says. This year, it plans on hiring a similar number. By comparison, Merrill hires about 1,500 to 1,700 into its training program, according to a spokeswoman for the firm. "If we don't grow, then we abdicate that opportunity to our competition," Weddle says. "Quite honestly, why would we do that?"
The firm casts a wide net when looking for new recruits, from college students to veterans to career changers.
Matt Doran, who oversees financial advisor career development at Edward Jones, says the firm will hire about 500 recent college graduates this year. It looks for students with good grades who are involved in their community, whether in athletics, through on-campus organizations or as residence assistants in dormitories. "They connote leadership and people skills," Doran says.
Edward Jones also hired a large number of military veterans: 471 in 2014.
However, most trainees about 70% according to the firm are career changers. "We look at every individual we come into contact with," says John Rahal, head of financial advisor talent acquisition at Edward Jones.
Applicants go through a 16-step hiring process that includes phone and face-to-face interviews with the Edward Jones talent acquisition team as well as field leaders, he says. The final stage is a four-hour simulation of what it is like to be a financial advisor.
Advisors like Korey Banks are filling out the ranks at Edward Jones. Image: David Yellen.
SELECTIVE AND RIGOROUS
"It's very selective, very rigorous," Rahal says. "It takes about 45 to 60 days to go through the hiring process. We want it to be that long. We want the candidates to contemplate what a day is going to look like to them."
Once hired, trainees study for their exams. Out of 100 candidates who are accepted, about 15 won't start training because they either failed their exams or found employment elsewhere, Rahal says.
Next, the recruits enroll in the firm's training program, which is run out of two locations: St. Louis and Tempe, Ariz.
"You learn customer interaction," Banks says of his experience. "You learn how to answer financial questions, present investing options and find out who is a prospective client and who isn't."
Of the 85 candidates who start training, only 72 will finish, Rahal says. Some find that the business isn't for them and they pursue employment elsewhere.
Rahal says that the firm is constantly re-evaluating its methods. For example, the hiring process used to take 22 days. Rahal says it was lengthened to help ensure that the screening was finding the right candidates.
HITTING THE PAVEMENT
Unlike other firms, which tend to prioritize placing new recruits onto teams in branch offices, Edward Jones continues to emphasize a one-advisor-per-office approach.
Candidates get to express where they want to open an office and Edward Jones evaluates whether there's a sufficient client base there. Rahal says it's very rare that the firm turns down a request.
One former Edward Jones advisor, who left two years ago, said that he felt that his market, a small city in the Pacific Northwest, was oversaturated with new recruits. "The middle group [of veteran advisors] is paying for that expansion," he says.
Rahal says the firm tries to carefully assess where to locate new offices, looking at such factors as historical growth rates and the number of potential clients that might be attracted to the Edward Jones model.
"The last thing we want to have is the clients get mad at the brand of Edward Jones because 'Good Lord, there is someone from Edward Jones contacting me every day.' So we are in fact very mindful of the opportunities," Rahal says.
Many new advisors choose to go near home. That was the case with Banks, who wanted to move back to New York from South Carolina.
His first year was spent building a book from scratch. Like many other new Edward Jones advisors, he hit the pavement.
"I kept doing what I had been told," he says. "I got out and joined the Chamber of Commerce. I went out and met four attorneys. I met four CPAs. I said yes whenever someone asked if I could come to a speaking engagement. Once you get in front of those people and you get that opportunity, you have to be prepared. It's like baseball; everyone can hit until you get thrown a curveball."
Through that kind of networking, Banks got his first clients. At the end of his first year, he had about $10 million in assets under management. (Banks later also took on a book of business from a terminally ill advisor.)
That process of building a book of clients from scratch can be daunting for new advisors. In order to survive, it's important to have the right mindset that you're here to help clients, says Sean Budlong, 47, an advisor in Schoolcraft, Mich.
"If your thought process is I have to make a sale a day or five sales a day, then I think it'll be very difficult to do," says Budlong, who joined Edward Jones in 2011 after working as a sales representative for a pharmaceutical company.
He adds, "If I do what's right for the client, that will take care of them and they will refer me to more clients like them."
Budlong says that he added 60 new clients last year, all based on referrals. Today, he has more than $40 million in AUM. More important, Budlong says, he's happy to have entered the profession because he gets to help people reach their goals.
"Did I have my doubts [in the beginning]? Absolutely. Was this job the hardest job I've ever had in my life? Absolutely. But it's the most rewarding job I've ever had," he says.
DIVERSIFYING THE RANKS
Edward Jones' recruiting efforts have also resulted in a more diverse advisor force than exists at other firms. As part of a recent On Wall Street survey, the firm reported that 19% of its advisors are women and 6% are minorities.
Most wirehouse and regional broker-dealers declined to provide data. Raymond James, however, said that 15% of its employee advisors were women. Hilliard Lyons also said that 15% of its advisors were women while less than 1% were minorities.
According to Cerulli Associates, only 12% of all advisors are women. The research firm does not keep data on minority advisors.
Meeting clients face-to-face remains a key focus at Edward Jones, and has helped to contribute to high client satisfaction ratings.
The firm recently ranked highest among brokerage firms in J.D. Power's annual investor satisfaction study. Edward Jones scored 817 points, besting the industry average of 807. Except for Wells Fargo, the other wirehouses scored below that average.
DRIVERS OF SATISFACTION
Mike Foy, the director of wealth management practice at J.D. Power, says that factors like transparency around fees and face-to-face contact are key drivers of client satisfaction.
"The culture [at Edward Jones] is very oriented toward empowering the advisor to provide face-to-face advice," Foy says.
"The areas where they tend to excel are not limited to investment performance, but include how the advisor is explaining that in terms of meeting [the client's] objectives and goals."
Edward Jones' leaders say that their model of embedding solo advisors in neighborhood communities is a key step in building that trust with clients.
That's the case with Banks, who operates in Long Beach, a suburb of New York that is on a barrier island off Long Island's South Shore. His office is just off the main street, Park Avenue, and is in walking distance from the commuter train station. The office is also a stone's throw from the beach and boardwalk.
"I've had a lot of people do business with me because I was in the neighborhood," Banks says, describing it as the ability to easily get a coffee with your broker.
Industry observers say there's some merit to Edward Jones' approach.
"What they are really good at is going to a small community and getting well known and winning trust," says Michael King, who heads a consulting and recruiting firm in New York City. "That's their biggest strength, I think."
Traditionally, the firm has not had a strong presence in urban centers, focusing instead on small towns and suburban neighborhoods. "The model works where overhead tends to be lower," says Bill Willis, president of Willis Consulting, a Los Angeles-based recruiting firm.
But Edward Jones is experimenting with different models in order to get a toehold in urban markets. In Boston, the firm has opened a multi-FA office. The advisors are still solo practitioners, but the costs of the real estate are lower in a shared office.
"That's exactly the kind of thing that we have to be willing to pilot and try," Weddle says.
He adds that the firm will probably limit those branch locations to two or three advisors, but the experimentation helps serve clients the firm might not otherwise get.
"We will have to be a little more creative and a little more innovative," Weddle says. "But we will figure it out as we go market by market."
Not every advisor has been happy about the firm's expansion and experimentation. Some former Edward Jones advisors say that the firm has become more corporate and less personal.
One ex-Edward Jones advisor, who had been with the firm for about 20 years, noted that the hiring spree has occurred in a bull market. "If we saw a market downturn, then I think you'd see them drop down to 12,000 advisors in a heartbeat," this advisor says.
A veteran Edward Jones advisor who asked not to be named said that as the firm expands, opportunities to meet top leadership may diminish.
KEEPING THE CULTURE
Maintaining the firm's intimacy and culture will be difficult, but he thinks the leadership is accomplishing that balancing act. "That's the main challenge, I think," he says. "As you grow, how do you keep the culture with fewer torch bearers of the older generation around?"
Edward Jones' culture, he says, is critical. "That's what keeps me around," he says. "We older guys get recruiting deals dangled in front of us all the time."
Candidly, industry insiders say that other broker-dealers like to recruit Edward Jones advisors. One recruiter, who asked not to be named, noted that many of them are "pretty aggressive self-starters."
Yet, it's hard to peel advisors away from Edward Jones because of the cultural ties, this recruiter says.
Jeff Allen, an advisor based in Tacoma, Wash., joined Edward Jones two years ago from Wells Fargo Advisors. He says he finds the advisor community more tight-knit at Jones than he did at the wirehouse.
"I liked being in an office because I like the camaraderie and being able to talk to people," Allen says. "I thought I would miss that. But I probably talk to the Edward Jones people here in Tacoma more than I talked to people when I was in a branch."
The advisors in Allen's region get together monthly to swap stories and to bounce ideas off one another, he says. Brian Boudreau, an engineer-turned Edward Jones advisor in Colorado Springs, Colo., says the firm still feels like an organization where advisors and leaders are on the same page, which he noticed after joining the firm four years ago.
"During my second week, I ran across the CEO of a big company in Denver," Boudreau says. "I was nervous and not sure how to approach this. I reached out to the No. 1 financial advisor in terms of production at the firm. I asked him to share some insight about how to approach the CEO. And he did he gave up 15 minutes to say what he would do."
Although Boudreau didn't win the client over, he says the pep talk was helpful and shows how even a new recruit can reach out to a top producer.
Weddle says that while the culture has not significantly changed since he joined the firm nearly 40 years ago, it has evolved. "With size comes a little more complexity and you need to be sure that you are thinking it through and making sure you have the right people in place to get those things done," Weddle says.
The firm's leaders are confident that they will hit their 2020 goals. Weddle says the firm will probably reach $1 trillion in total client assets before 2020. Last year, the firm had $54 billion in net new assets and it recently passed $900 billion in total assets.
Raising headcount is more challenging. Rahal says he monitors the attrition rates of new recruits on a monthly basis. For every 100 candidates who are accepted, just over 70% make it out of training and about 40% survive their first three years in the business.
Industry observers say that failure rate is in line with what might be expected for new recruits. "The reality is that it's a tough go from graduating from a training program to building a book," says Bill Butterfield, an analyst at Aite Group.
After an advisor has been with Edward Jones for 36 months or longer, the firm's attrition rate including deaths and retirements drops below 10%.
Rahal says that if the firm continues to keep success rates at those levels or higher, it should hit its headcount target in 2020. "If my team in talent acquisition does its job right, then those attrition rates drop because we know we found the right candidate," he says.
If the firm hits the mark, then five years from now there will be nearly 6,000 more advisors like Banks in the business.
Having made it over the early career hurdles, Banks says he's happy he switched career paths and he's looking to keep growing his practice.
"I wish I had started doing it earlier I really mean that," he says. "At other [jobs], I was just trying to get traction and figure out where I was headed. Now, I am pretty secure where I am, and I know where I'm headed."
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