Edward Jones' 2021 earnings rise on asset values and in-flow

Edward Jones loses hundreds of advisors but reaps higher profit

February 7, 2022 1:49 PM

A wealth manager that once had the largest force of financial advisors in the industry is, for the first time in a decade, almost certainly going to report a net drop in brokers over the past year.

In an SEC filing last month, The Jones Financial Companies, whose principal operating subsidiary is St. Louis-based employee brokerage giant Edward Jones, disclosed certain results from 2021 and the private offering of $52.3 million in equity shares for current and retired general partners. Access to those shares has helped make Edward Jones a repeat champion of advisor satisfaction among employee brokers, although its headcount has fallen during the pandemic after a pause in hiring and an overhaul of its training program. LPL Financial’s headcount surpassed that of Edward Jones this past summer.

If the company had roughly the same amount of Canada-based advisors as prior quarters at the end of 2021, its ranks in the U.S. will decline during a year for the first time since 2011. The news outlet AdvisorHub first reported the Jan. 12 filing with the SEC.

Despite the thinning headcount, the company supported “an increase in the number of profitable branches and an overall increase in branch profitability,” according to the filing.

To see the most interesting takeaways from the company’s earnings statement, scroll down our slideshow. For coverage of Edward Jones’ last quarterly disclosure in November, click here.

Note: The company didn’t break out the results for its American branches only, so each figure below relates to all of its offices in the U.S. and Canada, where it had 859 advisors as of its third-quarter earnings.

Financial advisor headcount

The number of advisors in Edward Jones branches slipped by a net 402 registered representatives, or 2% from the year-ago period, to 18,823 in 2021. Its ranks of brokers based in the U.S. have ticked down for at least four straight quarters dating to the fourth quarter of 2020, although it won’t be clear until the company releases its annual report next month whether the American branches saw net losses last year. The company’s American advisor headcount hasn’t decreased in a calendar year since 2011, when the company finished the year with 11,622, according to its annual reports. Over the course of the nine straight years with a growing number of reps through the end of 2020, Edward Jones’ ranks climbed by 58%, or 6,699 advisors.

Company’s explanation

Once known for speaking of a force of 20,000 and then 30,000 brokers, the company paused recruiting during the emergence of the pandemic in 2020 and agreed to make comprehensive changes to its advisor training and advancement practices in connection with a $34 million discrimination lawsuit settlement last year. In the earnings statement, the company included the reasons for fielding lower headcounts in recent quarters: “This was due to the partnership gradually restarting hiring following a temporary pause on the recruitment of non-licensed financial advisors in 2020, together with an intentional strategy to grow its impact by offering a plan and resources for both current financial advisors and new hires to promote branch team success.”

Client assets

Client assets under care surged 18% year-over-year to $1.82 trillion in 2021, due to rising asset values and net new assets of $93 billion. The inflow rose 41% last year. The firm has more than 7 million American or Canadian clients. With the rising equity prices for most of last year and net new assets coming to the firm, fee revenue jumped 28% to $10.42 billion.

Bottom line

The company earned net income before allocations to partners of $1.61 billion on net revenue of $12.28 billion, a 25% increase in profit despite a double-digit spike in operating expenses. Revenue and expenses soared by 22% last year. The firm’s operating costs reached $10.67 billion in 2021 because of higher advisor compensation paid from the fees earned on the assets and transactions and variable pay tied to higher profit for the partnership, as well as ongoing savings relating to the limits on travel and events during the pandemic.

Remark

The purpose of Edward Jones “is to partner for positive impact to improve the lives of its clients and colleagues and better its communities and society,” according to the earnings statement. “The firm continues to strive to help serious, long-term individual investors achieve their financial goals by understanding their needs and implementing tailored solutions.”