Edward Jones profits jump in first quarter 2023 on interest rates

Edward Jones adds advisors, reports double-digit profit growth

May 9, 2023 4:17 PM

After double-digit losses to its profits last year, Edward Jones is growing again on the impact of rising interest rates, big asset flows and a rebound in its financial advisor headcount.

The St. Louis-based wealth management firm's parent partnership, The Jones Financial Companies, raked in double-digit gains in net income in the first quarter, according to the firm's May 9 filing with the SEC. Edward Jones' incoming client assets soared by more than 75% from the year-ago period, and the firm's headcount moved into positive territory over the past three months after two years of losses.

"The firm is on a multiyear journey of transformation, one that is geared toward serving its clients more completely through deep personal relationships and comprehensive planning and advice," according to a statement released by the firm.

For the most interesting takeaways from Edward Jones' first-quarter earnings, scroll down the slideshow. To view coverage of Edward Jones' results in the fourth quarter, click here. For a look at where the company stood after the third quarter of 2022, follow this link.

Industry News

Edward Jones profits fall sharply but firm loses fewer financial advisors

March 13, 2023 2:19 PM

Note: All figures refer when possible to the company's U.S. business rather than its combined results including those in Canada, where it had 841 advisors at the end of the first quarter. The company breaks out most, but not all, of its results between the two countries.

Financial advisor headcount

The firm added a net 88 financial advisors to boost its headcount by less than 1% year over year to 18,009 by the end of the first quarter. The modest increase followed a year that saw Edward Jones' headcount remain roughly flat with the net loss of 10 brokers. A year earlier, in 2021, the firm sustained the first net drop in its ranks of advisors in a decade.

Hiring efforts

The firm has set a goal of hiring 1,500 to 1,700 advisors this year by tapping into existing employees with the potential of converting to a bigger role, external recruiting and training efforts, and restructuring of its branch structure to boost support for each broker.

"We remain focused on our strategy to grow and support branch team success, which in turn fuels the success of our clients, colleagues and the communities we serve," Don Aven, the firm's principal for branch and region development, said in a statement. "By providing more resources that enable financial advisors to have greater choice, flexibility and autonomy in how they support their clients, we seek to empower their future ability to deliver deep personal relationships and comprehensive planning and advice."

Client assets

Client assets under care have taken a hit from lower stock and bond values than the same time a year ago, but incoming customers buoyed Edward Jones from bigger declines. Overall client holdings ticked down 1% year over year to $1.69 trillion in the first quarter. On the positive side, net new assets soared by 80% to $32.8 billion.

Expenses

Costs jumped significantly in the first quarter compared to the same time a year ago due to rising expenses relating to technology investments, branch hiring, legal cases and compensation. Overall, Edward Jones' operating expenses outside of variable compensation tied to asset values rose 13% to $2.4 billion. The falling asset values pushed down variable pay by the same percentage to $403 million in the past three months.

Bottom line

For the quarter, the company generated net income before allocations to partners of $390 million on revenue of $3.19 billion. Revenue grew 8% year over year on higher net interest and dividend business tied to the Fed's rate hikes and gains in the firm's U.S. Treasury yields. Profits surged 10% compared to the same time a year ago.

Remark

Edward Jones plans to spend over $1 billion on new technology tools and overhauls in 2023, with a significant portion earmarked for investment advisory software aimed at the "four key principles" of personalization, flexibility, tax strategy and an expanded product shelf, according to the firm.

"We're creating a more personalized experience for our financial advisors and their clients," Steve Harris, the firm's principal for investment advisory strategic initiatives, said in a statement. "By providing our financial advisors access to leading-edge tools, they're able to help clients arrive at solutions that optimize their portfolios with a unique set of solutions more quickly."