Edward Jones: Confronting Success in 2006
EDWARD JONES IN 2006: CONFRONTING SUCCESS CASE STUDY
INTRODUCTION & BACKGROUND Founded in 1922 in St. Louis by Edward Jones, Sr., Edward Jones (Edward Jones Financial Companies, LLC) is today the nation’s fourth-largest brokerage with 8.1 million retail accounts and retail client assets of $369 billion as of the end of 2005 (Collie & Smith, 2008, p. 18). At the end of 2005, Edward Jones had 9,733 brokers working in 8,581 domestic and 660 foreign (Canada and the UK) offices (Collie & Smith, 2008, p. 18). Edward Jones falls into the category of a full-service brokerage (offering a variety of financial services products and direct, personalized assistance from a Financial Advisor) and it competes against other traditional full service brokerages as well as against discount brokerages, online brokers, banks, insurance companies, financial planners, and mutual funds. Under the direction of Edward Jones, Jr., the company Edward Jones made its initial expansion starting in the 1950s and 1960s into rural areas and small suburbs where there was little or no competition. Edward Jones began to pursue a more ambitious expansion plan in the 1970s and 1980s, following a plan and strategy set out by Financial Advisor and partner John Bachman. Bachman served as managing partner of the firm from 1980 to 2004, steering the firm, with the help of consultant Peter Drunker, on an aggressive expansion (including expansion into metropolitan areas beginning in 1981), while still heeding to the firm’s original strategic principles. A central tenant of the strategy is the belief that the “end customer was the only client of the firm...every client was to be treated equally and afforded the same high ethical standards and access to services” (Collie & Smith, 2008, p. 5). Other key principles in Edward Jones strategy stressed the power of individual entrepreneurs in offices with just one financial advisor and one branch office assistant, the notion of employees as owners, the stress
INTRODUCTION & BACKGROUND Founded in 1922 in St. Louis by Edward Jones, Sr., Edward Jones (Edward Jones Financial Companies, LLC) is today the nation’s fourth-largest brokerage with 8.1 million retail accounts and retail client assets of $369 billion as of the end of 2005 (Collie & Smith, 2008, p. 18). At the end of 2005, Edward Jones had 9,733 brokers working in 8,581 domestic and 660 foreign (Canada and the UK) offices (Collie & Smith, 2008, p. 18). Edward Jones falls into the category of a full-service brokerage (offering a variety of financial services products and direct, personalized assistance from a Financial Advisor) and it competes against other traditional full service brokerages as well as against discount brokerages, online brokers, banks, insurance companies, financial planners, and mutual funds. Under the direction of Edward Jones, Jr., the company Edward Jones made its initial expansion starting in the 1950s and 1960s into rural areas and small suburbs where there was little or no competition. Edward Jones began to pursue a more ambitious expansion plan in the 1970s and 1980s, following a plan and strategy set out by Financial Advisor and partner John Bachman. Bachman served as managing partner of the firm from 1980 to 2004, steering the firm, with the help of consultant Peter Drunker, on an aggressive expansion (including expansion into metropolitan areas beginning in 1981), while still heeding to the firm’s original strategic principles. A central tenant of the strategy is the belief that the “end customer was the only client of the firm...every client was to be treated equally and afforded the same high ethical standards and access to services” (Collie & Smith, 2008, p. 5). Other key principles in Edward Jones strategy stressed the power of individual entrepreneurs in offices with just one financial advisor and one branch office assistant, the notion of employees as owners, the stress
References: Collie, D. & Smith, T. (2008). Edward Jones in 2006: confronting success. Harvard Business School Case Study, No. 9-707-497, Rev. January 11, 2008. Boston: Harvard Business School Publishing. Duffy, D. (2002, February). At Edward Jones, the handshake still rules. Darwin, 2(2), 26-31. Hume, L. (2005, September 30). Edward D. Jones fined $300,000; NASD: firm violated MSRB’s G-15, G-27. Bond Buyer, 353, p. 1. Kim, J.J. & Opdyke, J.D. (2006, February 23). Individual investors shift assets to stocks; brokers report near-record trading activity, investment flows; moving out of real estate. Wall Street Journal, p. D1. Scotti, M. (2006, January 1). This is the year of pre-trade advances and market structure changes. Traders Magazine, p. 1. Spangler, T. (2005, March). Garbage disposal; in charge of information-technology strategy and operations for the 83-year-old brokerage firm, which reported revenue of $2.8 billion for 2004. Baseline, 1(41), 69. Warner, J. (2006, June 1). Where the growth is: with their market share growing 20% a year and the boomer generation’s accumulated treasure to deploy, independent broker-dealers are on a prosperous path. Financial Planning, p. 1.