Compared to its competitors, Edward jones
employed a different strategy and concentrated on building personal
relationships and serving individual investors. Edward Jones developed a focus
on client based business. Edward Jones focused on rural areas and small towns where
the competition is minimal. The company diversified this approach by being more
metro focused over the years, yet differentiating itself by maintaining the
same personal relationship style of business with its clients.
Financial Advisors were considered as the owner of the
business/offices they ran. Because of this ownership and entrepreneurial
mentality, they employees acted in the best interest of the clients. Edward
jones business strategy was conservative investing that appreciates holding
assets and making investments for long-term, low-turnover investing and focused
on the average American investors, which had the account size less than $70,000
unlike the high net-worth households targeted by most brokerage firms. To
create synergies among partners and to match with its own strategy, EJ offered
revenue-sharing options with companies such as American Funds.
Unlike other firms, which focus heavily on corporate
functions or investment banking, Edward Jones’ center of activity was household
investing and helping individuals who are money conscious and would be affected
if their investment is lost. Furthermore, the firm did not offer any tiers for
different income levels, and FAs sought accounts of all sizes. Monetarily
cautious clients required a good balance between spending too much money so
that they finished up all their savings before death; or spending too little
that they compromise the quality of living standards. Edward Jones built personal
relationships with the clients and dealt them face to face. Pricing and bill
rates were nominal and didn’t vary for any level. However, FAs were in practice
of convincing their clients to invest large share of assets in the firm.
Firms like Merrill Lynch offered tiered products to
customers. The firm offered different levels of interaction between the client
and the company. Customers with less than $100,000 investments would use call
center services. Clients with up to $500,000 could speak to brokers but didn’t
have personal broker at their disposal. Finally, clients with over $500,000
would have a traditional personal relationship with broker and have single
broker at their disposal. The business was also commission based.
Given the strong and personal relationship with its clients
(retirees, pre-retirees, and small business owners), and its long-term conservative
investing strategy, we believe that Edward Jones has positioned itself in the
market where it is going against the industry norms but actively deciding to
stay old school. Hence, it would be able to survive the financial crisis.