You're curious about how Edward Jones financial advisors earn their living, and that's a smart question! Understanding their compensation structure can give you valuable insights into the advice they provide and how it aligns with your financial goals. So, let's dive deep into the fascinating world of how Edward Jones people get paid.
Unpacking the Edward Jones Compensation Model
Edward Jones, a prominent financial services firm, employs a multi-faceted approach to compensating its financial advisors. It's not a simple salary or commission system; rather, it's a blend of different revenue streams designed to incentivize advisors to build and maintain strong client relationships while growing their book of business.
Let's break it down step-by-step:
Step 1: Understanding the Foundation – Client-Generated Revenue
Ready to unravel the core of Edward Jones' compensation? It all begins with the services provided to clients and the investments they make. Edward Jones generates revenue from its clients in various ways, and a portion of this revenue is then paid to the financial advisor.
Sub-heading 1.1: Transactional Revenue (Commissions)
For many years, a significant portion of an Edward Jones advisor's income came from commissions on individual transactions. This is still a key component, especially for brokerage accounts. When clients buy or sell certain investments, a commission is typically charged.
- Equities and Fixed Income Investments: When you buy or sell stocks or bonds, Edward Jones may act as an agent or broker, charging a commission. For bonds, they might also include a markup or markdown, which is essentially embedded in the price you pay or receive.
- Mutual Funds and Annuities: These products often come with "sales loads" (sales charges), commissions, or concessions. For mutual funds, a front-end sales charge (typically 3% to 5.75%) might be deducted from your initial investment. Annuities can also have commissions ranging from 1% to 7%.
- Other Transaction Fees: Certain equity and fixed-income products in brokerage accounts may incur specific transaction fees.
Sub-heading 1.2: Asset-Based Fees (Advisory Programs)
Edward Jones has been increasingly shifting towards a fee-based model, especially with its advisory programs like "Advisory Solutions" or "Guided Solutions." In these programs, instead of paying commissions on each transaction, clients pay a recurring fee based on the value of the assets under management (AUM).
- Percentage of Assets: The fee is typically a percentage of the market value of all assets held in the client's account, assessed monthly or quarterly. This percentage often decreases as the asset value increases, creating a tiered fee structure.
- Alignment of Interests: This fee-based model is designed to align the advisor's interests with the client's. As the client's portfolio grows, the advisor's compensation also increases, theoretically incentivizing the advisor to make investment decisions that benefit the client's long-term growth.
Sub-heading 1.3: Other Client-Paid Fees
Beyond commissions and asset-based fees, clients might incur other miscellaneous fees that contribute to Edward Jones' overall revenue, and indirectly, the advisor's potential earnings. These can include:
- Fees for IRAs
- Wire transfer fees
- Returned check fees
- Transfer on death services
- Money market fund low balance fees
Step 2: Revenue Sharing and Third-Party Payments – A Deeper Dive
It's important to know that Edward Jones (and, by extension, its advisors) also receives revenue from third-party product providers and money managers. This is often referred to as revenue sharing.
- 12b-1 Fees and Trail Commissions: Mutual fund and insurance companies often pay Edward Jones ongoing service fees (known as 12b-1 fees for mutual funds) or trail commissions and renewal commissions for products like variable annuities. A portion of these fees is then paid to the financial advisor.
- Revenue Sharing Agreements: Edward Jones can have revenue-sharing agreements with various financial institutions. This means that a percentage of the assets clients invest in certain products from these third parties is paid back to Edward Jones.
- Potential Conflicts of Interest: It's crucial for clients to be aware that these revenue-sharing arrangements can create potential conflicts of interest. Advisors might be incentivized to recommend products that offer higher payments to Edward Jones, rather than necessarily being the absolute best fit for the client. Edward Jones states they aim to mitigate this by paying financial advisors the same percentage regardless of the actual sales charge for a specific mutual fund.
Step 3: Advisor Payout Levels – What Percentage Do They Get?
This is where the direct compensation to the Edward Jones financial advisor comes into play. Financial advisors typically receive a payout level on the revenue Edward Jones generates from the client accounts they manage.
- General Payout Range: Financial advisors generally receive between 36% and 40% of the revenue Edward Jones receives from asset-based fees, transactional revenue, 12b-1 fees, trail commissions, and other premiums generated by activity in their accounts.
- Factors Influencing Payout: Several factors can influence an individual advisor's payout level:
- Years of Experience: Advisors with less tenure at the firm might have a payout level below the general range. As they gain experience, their payout percentage can increase.
- Branch Location: The geographical location of the branch can also play a role.
- Type and Amount of Investment: Different investment products and the volume of assets can impact the specific payout.
- Applicable Discounts: Any client-specific discounts on fees or commissions can affect the advisor's portion.
Step 4: Additional Compensation and Incentives
Beyond the core payout, Edward Jones advisors can earn additional compensation through various bonuses and incentive programs, designed to reward performance, growth, and long-term commitment to the firm.
Sub-heading 4.1: Supplemental Salary and Minimum Guaranteed Salary
- New Advisors: For new financial advisors, Edward Jones may provide a supplemental salary for up to four or five years. This salary is not tied to performance, commissions, or assets brought into the firm, providing a baseline income during the crucial initial years of building a practice.
- Minimum Guaranteed Salary (MGS): All financial advisors receive a minimum guaranteed salary as determined by federal and state law. This MGS is paid regardless of performance.
Sub-heading 4.2: Performance-Based Bonuses
- Trimester Bonuses: Edward Jones often offers trimester bonuses (paid three times a year) based on the profitability of the firm and the individual branch office. These are supplementary to their regular earnings and reward advisors whose efforts contribute positively to the branch's financial performance.
- New Asset Compensation/Bonuses: Advisors can earn bonuses for bringing in new assets to the firm. This is especially significant for new advisors, with structured bonuses for reaching specific asset or revenue targets within a set timeframe.
- Milestone Bonuses: Edward Jones recognizes and rewards key milestones early in an advisor's career with bonuses for achieving certain targets in client accounts and assets.
Sub-heading 4.3: Profit Sharing and Partnership Opportunities
- Profit Sharing: Edward Jones has a "share the work – share the rewards" culture. A portion of the firm's net profits is distributed annually in the form of a qualified profit-sharing plan. Advisors are often 100% vested in these contributions from day one.
- Partnership Potential: A significant long-term incentive at Edward Jones is the opportunity to become a limited and/or general partner in The Jones Financial Companies, L.L.L.P., the parent company. Partners share in the earnings of Edward Jones and its affiliates, with their income varying based on the firm's profitability and their ownership stake. This is often seen as a pinnacle of the Edward Jones career path.
Sub-heading 4.4: Incentive Travel Opportunities
Edward Jones also offers incentive travel opportunities to reward superior performance. Advisors who meet certain production and diversification criteria may qualify for trips to top-tier resorts, often including spouses and sometimes families.
Step 5: The "No Ceiling" Earning Potential
Edward Jones often highlights that there's no cap on an advisor's earning potential. Their compensation is directly tied to the effort they put in, their ability to build and retain client relationships, and the growth of their assets under care. While new advisors receive a structured salary and bonuses to help them get started, experienced advisors' income is heavily reliant on their book of business and overall performance.
Summary: A Blended Approach
In essence, Edward Jones financial advisors get paid through a combination of:
- Commissions: From transactional activity in brokerage accounts.
- Asset-Based Fees: From advisory programs where clients pay a percentage of their assets.
- Revenue Sharing: A portion of fees and commissions Edward Jones receives from third-party product providers.
- Performance-Based Bonuses: For achieving targets, new assets, and overall branch profitability.
- Supplemental Salary: For new advisors during their initial years.
- Profit Sharing: A share of the firm's overall profits.
- Partnership Earnings: For those who become partners in the firm.
This blended compensation structure aims to incentivize advisors to provide ongoing service and grow client assets, while also rewarding them for their sales activities and overall contribution to the firm's success.
10 Related FAQ Questions
Here are 10 frequently asked questions about how Edward Jones people get paid, along with quick answers:
How to understand if my Edward Jones advisor is commission-based or fee-based?
Your account type at Edward Jones will largely determine this. Brokerage accounts are generally commission-based, while Advisory Solutions or Guided Solutions programs are fee-based on assets under management. Your advisor should clarify this when discussing your account.
How to determine the exact percentage my Edward Jones advisor receives?
Edward Jones states that financial advisors generally receive between 36% and 40% of the revenue the firm receives from your accounts. The exact percentage can vary based on experience, location, and investment type.
How to know if Edward Jones advisors have a conflict of interest due to compensation?
Yes, conflicts of interest can arise, particularly with commission-based products or revenue-sharing agreements with third parties. Edward Jones attempts to mitigate this by standardizing advisor payouts on certain products, but it's always wise to ask your advisor about their compensation on specific recommendations.
How to find out the typical salary range for an Edward Jones financial advisor?
For an Edward Jones financial advisor, the average annual pay in the US can range, with some sources reporting around $100,000 for a Financial Advisor and $58,429 for an Associate Financial Advisor, though earning potential is often uncapped and performance-driven.
How to differentiate between various types of fees I might pay as an Edward Jones client?
You might pay commissions on transactions (stocks, bonds, mutual funds), asset-based fees for advisory programs (percentage of AUM), and miscellaneous fees (IRA fees, wire transfers). Always review the fee disclosures and prospectus for clarity.
How to understand the "supplemental salary" for new Edward Jones advisors?
New Edward Jones financial advisors may receive a supplemental salary for up to four or five years to help them establish their practice. This salary is not tied to performance initially, providing a stable income during their growth phase.
How to become an Edward Jones partner and what are the compensation benefits?
Becoming an Edward Jones partner is a long-term goal for many advisors, based on branch profitability, leadership, and ethical conduct. Partners share in the overall profits of the firm, which can significantly increase their total compensation.
How to assess if Edward Jones' compensation structure is competitive compared to other firms?
Edward Jones' compensation is often considered competitive, especially given its focus on individual branch ownership and the potential for profit sharing and partnership. Rankings by financial publications often place them high in advisor pay for various production levels.
How to inquire about the specific compensation an Edward Jones advisor receives from my account?
You can directly ask your Edward Jones financial advisor to explain how they are compensated for the services they provide to your account. They are obligated to disclose this information.
How to know if Edward Jones has shifted towards more fee-based compensation?
Yes, Edward Jones has been steadily shifting towards a more fee-based model for its advisory programs, which means a growing portion of their revenue, and advisor compensation, comes from a percentage of assets under management rather than just transaction-based commissions.