Privately held Edward Jones hews to a different strategy than the rest of the industry, and its comp plan diverges from industry trends in important ways.
Structured as a partnership, compensation at the St. Louis-based wealth management firm is based on advisor production and firm profitability. In particular, the firm uses a profit-sharing bonus to motivate its 12,000 advisors, one fourth of whom are partners. Partners receive the bonus, which is based on both branch and overall firm profitability; typically the firm assigns one advisor per branch.
"The variable piece of ours is certainly tied to productivity, but it's also very importantly tied to the success that the firm is enjoying," acknowledges James Weddle, Edward Jones' managing partner.
Profit sharing, like the economy, runs in cycles. In recessionary times, the bonus shrinks. But during growth periods and market booms, like 2013, the firm and its advisors are richly rewarded. "There is definitely an incentive for our financial advisors to grow their business," Weddle says. "You participate in the variable compensation the more you grow."
This year's comp plan at EJ is virtually the same as last year. "One of the things we don't do is that we don't update our comp model on an annual basis, as other firms do," says Phil Owen, a partner in the firm's finance division. However, the investment firm will be offering new partnerships to some of its advisors later this year, an event that typically takes place every three to four years. The newly minted partners will have the opportunity to share in the firm's profit sharing plan-it's so called variable bonus-substantially increasing their payout.
"We want to maximize the number of owners at the firm," says Weddle. "I believe that owners act differently than employees. They bring their A game. They take pride in what they do." And he adds, "They are taking a longer view and perspective."
That longer view is tied to growth. Weddle says the firm hired 700 advisors last year, and his goal is to boost the advisory staff from its current 14,000 advisors, with approximately $730 billion in assets under management, to 20,000 advisors with $1 trillion under management by 2020.