It's a smart move to understand exactly how a financial firm charges its clients, especially when it comes to long-term financial planning. Edward Jones, with its extensive network of financial advisors, has a particular fee structure that's important to grasp. Let's dive into how they charge clients, step by step, so you can make informed decisions about your investments.
Understanding Edward Jones' Fee Structure: A Step-by-Step Guide
Step 1: Let's start by considering your current investment approach. Are you someone who prefers to make your own investment decisions, or do you lean towards professional guidance? Your answer to this question is a key factor in determining how Edward Jones might charge you, as they offer different account types designed for varying levels of client engagement.
Step 2: Identify Your Edward Jones Account Type
Edward Jones primarily offers two broad categories of accounts, each with distinct fee structures:
Sub-heading: Brokerage Accounts (Transactional/Commission-Based)
If you prefer to be more hands-on with your investments and make individual trading decisions, a brokerage account (often referred to as an Edward Jones Select Account) is likely what you have or would open. In this model, you pay a commission each time you buy or sell certain investments.
- How it works: When you execute a trade (e.g., buying shares of a stock or a mutual fund), Edward Jones charges a commission or a sales charge.
- Typical investments: This account type generally includes a wide range of investments such as individual stocks, bonds, certificates of deposit (CDs), mutual funds, exchange-traded funds (ETFs), and annuities.
- Commission range: Commissions and sales charges typically range from 0.75% to 5.75% of the investment amount, though this can vary based on the type and size of the trade. For bonds, Edward Jones might act as a principal, meaning they buy and sell from their own inventory, and their compensation (markup/markdown) is included in the price.
- Predictability: Your total expenses in a brokerage account can be less predictable as they depend directly on your trading activity. More trades generally mean more commissions.
- Minimums: There is typically no minimum investment for a Select Account, although some specific investments may have their own minimum purchase amounts.
Sub-heading: Advisory Programs (Fee-Based/Asset-Based)
If you prefer to delegate investment decisions to a professional and receive ongoing advice and portfolio management, you'll likely be in one of Edward Jones' advisory programs. These programs charge an asset-based fee, meaning a percentage of the assets under management.
- How it works: Instead of per-transaction commissions, you pay an ongoing fee, usually calculated as an annual percentage of the market value of the assets in your account. This fee is typically deducted monthly, in arrears.
- Key programs: Edward Jones offers several advisory programs, including:
- Edward Jones Guided Solutions®: This client-directed advisory program offers ongoing investment advice and services. It comes in two main flavors:
- Guided Solutions Fund Accounts: Focuses on mutual funds and ETFs.
- Guided Solutions Flex Accounts: Allows for a broader range of investments, including stocks, mutual funds, ETFs, bonds, and CDs.
- Edward Jones Advisory Solutions®: A "wrap fee" program where the fee covers investment advisory services, trading costs, performance reporting, and more. This often involves Unified Managed Accounts (UMAs) which can combine different investment strategies.
- Edward Jones Guided Solutions®: This client-directed advisory program offers ongoing investment advice and services. It comes in two main flavors:
- Fee Structure (General): The annual program fee typically starts around 1.35% (for the first $250,000) and decreases as your asset level increases. For example, for assets over $10 million, the rate can drop to around 0.50%.
- Predictability: Fee-based accounts generally offer more predictable expenses over time, as the fee is a consistent percentage of your assets.
- Minimums: Advisory programs generally have minimum investment requirements, such as $25,000 for Guided Solutions Flex Accounts.
Step 3: Understand Additional Fees and Expenses
Beyond commissions or asset-based fees, Edward Jones clients may encounter several other types of charges:
Sub-heading: Internal Fund Expenses (Third-Party Costs)
- Many investments, especially mutual funds and ETFs, have their own internal expense ratios (also known as "operating expenses" or "management fees"). These are charged by the fund company, not directly by Edward Jones, but they reduce the overall return of your investment.
- Edward Jones may receive 12b-1 fees or trail commissions from mutual fund companies and insurance companies (for variable annuities). These are ongoing service fees paid by the fund company to Edward Jones for distribution and servicing of their products. These fees are embedded within the fund's expense ratio.
Sub-heading: Account-Based Fees and Service Charges
These are miscellaneous fees for specific services or account types:
- Annual Account Fees: Certain account types, such as Traditional and Roth IRAs, may have an annual account fee (e.g., $75 per year).
- Money Market Fund Fees: If your cash is swept into an Edward Jones Money Market Fund, there might be a monthly fee if your balance falls below a certain threshold (e.g., $3 per month for balances below $2,500 for Investment Shares).
- Transfer Fees: Fees for transferring an entire account out of Edward Jones (e.g., $95).
- Wire Transfer Fees: Charges for sending or receiving wire transfers (domestic and international).
- Returned Check/ACH Fees: If a payment bounces.
- Estates Service Fee: Charged for re-registering assets during estate processing.
- Physical Certificate Issuance Fee: If you request a physical stock certificate.
Sub-heading: Margin Interest
- If you use a margin account to borrow money against your investments, you will be charged interest on the borrowed amount.
Step 4: Review Your Account Statements and Disclosures
- Periodically review your account statements: These statements should detail all fees and charges applied to your account.
- Consult fee schedules and brochures: Edward Jones provides comprehensive disclosure documents, such as the "Schedule of Fees" for brokerage accounts and IRAs, and "Brochures" for advisory programs (Form ADV Part 2A). These documents outline the specific fees and how they are calculated. Your financial advisor can provide these, or you can find them on the Edward Jones website. It is crucial to read these documents carefully.
Step 5: Don't Hesitate to Ask Your Financial Advisor
- Your Edward Jones financial advisor is your primary point of contact for understanding your fees. Don't be afraid to ask detailed questions about any charges you see or anticipate. They should be able to explain how your fees are calculated, what services they cover, and if any discounts apply to your situation.
- It's a good practice to have an open discussion about compensation at the outset of your relationship to ensure there are no surprises later.
Related FAQs:
Here are 10 frequently asked questions about how Edward Jones charges clients:
How to determine if Edward Jones' fees are right for me? You can determine this by comparing their fee structure (transactional vs. asset-based) with your investment goals, trading frequency, and desired level of professional guidance. If you prefer active trading, a commission-based account might be more suitable, but if you want ongoing advice and portfolio management, an asset-based advisory program could be better.
How to find the specific fee schedule for my Edward Jones account? You can typically find the specific fee schedule for your account type on the Edward Jones website under their "Disclosures" or "Account Fees" sections. Alternatively, your Edward Jones financial advisor can provide you with the most up-to-date schedule.
How to calculate the total annual cost of an Edward Jones advisory account? For an advisory account, the total annual cost is primarily the annualized program fee (a percentage of your assets under management), plus any underlying internal fund expenses (expense ratios) of the investments within your portfolio.
How to avoid unnecessary fees with Edward Jones? To avoid unnecessary fees, understand your account type and its associated charges. Minimize frequent trading in commission-based accounts, maintain required minimum balances in money market funds, and familiarize yourself with any service fees before requesting specific transactions (like wire transfers).
How to understand the difference between commissions and asset-based fees? Commissions are one-time charges applied per transaction (buying or selling an investment) in brokerage accounts. Asset-based fees are ongoing charges, typically a percentage of your total assets under management, paid regularly (e.g., monthly or quarterly) in advisory programs, regardless of trading activity.
How to know if my Edward Jones advisor is compensated by commissions or fees? Edward Jones financial advisors are compensated based on a portion of the revenue the firm receives, whether from commissions (in brokerage accounts) or asset-based fees (in advisory programs), as well as other revenue streams like 12b-1 fees. Their compensation structure aligns with the type of account you have.
How to compare Edward Jones fees to other financial institutions? To compare, gather fee schedules from other firms (brokerages, robo-advisors, other full-service advisors). Look at commission rates, advisory program percentages, and any recurring account maintenance fees. Also, consider the services offered for the fees.
How to inquire about potential fee discounts at Edward Jones? You should directly ask your Edward Jones financial advisor about any potential fee discounts. Discounts may be available based on factors like the total value of your assets across all your Edward Jones accounts or specific promotions.
How to understand internal fund expenses in my Edward Jones account? Internal fund expenses (expense ratios) are disclosed in the prospectus of each mutual fund or ETF you invest in. You can access these prospectuses through your Edward Jones advisor or by searching for the fund's ticker symbol online.
How to manage fees when transferring an account to or from Edward Jones? When transferring an account, be aware of any "transfer-out" fees Edward Jones may charge (or "transfer-in" fees from the receiving institution). Discuss these potential costs with both firms involved in the transfer to understand the full financial implications.
