Edward Jones’ Headcount Slide Continues
Edward D. Jones & Co.’s broker roster slipped by 1.6%, or 306, from last year to 18,855 in June as the firm notched its second sequential decline, according to a quarterly Securities and Exchange Commission filing on Friday.
Headcount at Jones had been growing at a rate of around 6% per year prior to the Covid-19 pandemic, but the firm had temporarily paused in 2020 its usually robust hiring of non-licensed trainees as one of its “measures to optimize firm resources and control costs,” according to the filing and a company spokesperson.
Jones restarted hiring in September 2020, but the firm, which at one point had aimed for 30,000 brokers, is also taking a more “innovative and intentional” approach to recruiting that focuses on retention and could slow hiring going forward, the company said after reporting headcount dropped by just under 1% year-over-year in the first quarter.
“As we continue to focus on growth with impact, we are implementing tailored plans for our financial advisors, to enable them to more deeply serve current clients and develop meaningful relationships with new ones,” Jones’ Managing Partner Penny Pennington said in a prepared statement, affirming its commitment to the new strategy.
At the same time, the attrition rate among Jones brokers ticked up to 6.6% for the second quarter, ahead of 5% in the year-ago quarter. That figure is also ahead of the 5% and 2% rates advertised in the second quarter by wirehouse firms Merrill Lynch and Morgan Stanley, respectively. Jones said its attrition rate was 7.4% for the first half of the year.
(Bank of America reported a headcount of 19,385 in June but includes private bankers and salaried bank-based brokers along with its core Merrill Lynch sales force as part of that headcount.)
Despite the headcount slippage, Jones’ results continued to climb from last year’s pandemic-induced slump as the company said it benefitted from market appreciation and an ongoing pivot on fee-based revenue and away from its core business selling mutual funds to mom-and-pop investors.
Jones’ net revenue rose 30% to $3.034 billion, up from $2.325 billion. Its earnings, prior to being divided among its general and limited partners, rose 54% to $443 million, up from $288 million.
Advisory assets of $646 billion represented 38% of its total $1.714 trillion in total assets, the company said. One year ago, Jones had $1.305 trillion in assets, of which $452 billion, or nearly 35%, were in fee-based accounts.
Meanwhile, operating expenses increased 27% to nearly $2.6 billion in the second quarter of 2021 compared to the year-ago quarter, primarily due to an increase in compensation and benefits expense tied to variable compensation paid to advisors.
The company said it continued to generate cost savings from pandemic-related restrictions on in-person events and travel, but warned that it could implement additional unspecified “measures to reduce future operating expenses” if the market or economy worsens.
Jones also continues to defend itself against legal claims by its former brokers trainees even as it finalizes payments tied to a separate settlement in a $34 million race discrimination lawsuit, according to the filing.
Settlement payments in the case, brought by former advisor Wayne Bland, have begun to be administered, the company reported, and those will go to around 800 current and former Black financial advisors who were eligible. The company also agreed as part of the pact to update its training program.
Still pending, however, is a separate proposed wage-and-hour class action that relates to Jones’ advisor training program, which was also filed against the firm by Bland, the same plaintiff in the discrimination case, along with three other former advisors, in 2018.
Their lawsuit alleges Jones violated the Fair Labor Standards Act by failing to pay overtime to financial advisor trainees and early career advisors, and misclassifying them as salaried employees exempt among federal wage and hour laws. The company has denied the allegations and, in its earnings report this quarter, again pledged–as it had in the prior quarter–to “vigorously defend” itself.