Edward Jones boss says top brokers stick around

By Joseph A. Giannone

NEW YORK (BestGrowthStock) – Departures of two top brokers put Edward D. Jones & Co in a rare spot: fending off negative news.

The No. 4 U.S. brokerage, with more than 12,600 brokers, lost two million-dollar producers last month to rivals. Rebecca Frazier joined Bank of America’s Merrill Lynch (BAC.N: ) in Tennessee, while Bradley Hare jumped to Morgan Stanley Smith Barney (MS.N: ) in Ohio.

These moves stoked talk in the industry that the St. Louis firm might face a wave of defections. Yet Managing Partner James Weddle told Reuters on Friday that attrition remains thin among its most valued advisers.

“There is no mass exodus,” Weddle said during a phone interview. “I hate to lose anybody, but we’ve loss less than 1 percent of our top producers, at an annualized rate.”

In the first quarter a total of 84 advisers left, or a 2.8 percent annual attrition rate. Of the 84, only 10 were among the firm’s 5,000 most profitable, veteran advisers, he said.

For more than 20 years, the company has expanded its army of one-person brokerage offices by roughly 10 percent a year, ending 2009 with about 12,625 advisers in the United States and Canada serving nearly 7 million clients.

The employee-owned partnership has seen earnings and revenue rebound this year. Through the end of April, revenue rose 15 percent and earnings more than doubled to $115 million, reflecting recent cost-cutting efforts.

Net income before $72 million of employee bonuses and profit sharing — a 40 percent payout — nearly tripled to $187 million in the first trimester. That reflected a rebound from the dark days of 2009, as investors shifted more money from money-market funds and CDs to mutual funds and bonds.

“I’m very excited, but you have to be leery of the economy. Things are showing signs of life, though slowly,” he said.

To further boost profits, the partnership, which focuses on smaller individual investors, said last month it would raise the minimum fees and commissions expected from its brokers, starting next year. For advisers in place five-and-a-half years, the minimum will rise 11 percent to $20,000 a month.

In a new twist, Weddle said Edward Jones will measure its progress by tracking the number of clients, in addition to the usual focus on revenue, earnings and rankings of advisers.

“If we could, we’d like to measure how many customer needs are being met, the number of households under care,” said Weddle, who is currently drafting a new five-year business plan. “That’s far more appropriate.”

Weddle also said Jones is developing “unified managed accounts” for its larger accounts, a product that gives brokerage customers access to funds and investments from hundreds of other firms and can help control income taxes.

The firm also intends to continue its steady pace of expansion without acquisitions.

Unlike most brokerages, Edwards Jones attracts most of its advisers from professionals leaving other careers. Weddle said the firm intends to expand its ranks by more than 1,100 advisers this year.

“We’re targeting 9 percent growth this year,” said Weddle, who noted recruiting is more challenging as rival firms recover from the financial crisis.

“The environment might lighten up, but right now this is not exactly the favorite place for career changers,” he said, citing the uncertainty surrounding regulatory reform, last week’s 1,000-point market sell-off and fraud accusations by regulators against Goldman Sachs (GS.N: ) and other banks.

“I hate to see those accusations. It reflects on the industry as a whole and fuels concerns. It makes investors wonder if the markets are fair place,” Weddle said.

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(Reporting by Joseph A. Giannone; Editing by Steve Orlofsky)

Edward Jones boss says top brokers stick around