How much does Edward Jones take? This is a question that many investors, both new and experienced, ponder when considering working with this well-known financial services firm. The answer, as with many things in the financial world, isn't a simple, single number. Edward Jones' compensation structure is multifaceted, incorporating various fees and charges depending on the type of account you open, the investments you choose, and the services you utilize.
Are you ready to unravel the mystery of Edward Jones' fees and gain a clearer understanding of how your investments might be impacted? Let's dive in!
Step 1: Understand the Two Main Compensation Models
Edward Jones, like many financial firms, operates under a dual registration model, meaning they can act as both a broker-dealer and an investment adviser. This distinction is crucial because it dictates the primary way they charge for their services.
Sub-heading: Commission-Based Accounts (Brokerage Accounts)
In a commission-based model, you pay a fee each time you buy or sell certain investments. This is often referred to as a transactional model.
- How it works: When you open an Edward Jones Select Account (their brokerage account), you'll incur a commission or sales charge every time you execute a trade. This applies to investments like stocks, bonds, and some exchange-traded funds (ETFs).
- What you pay: Commissions generally range from 0.75% to 5.75% of the trade value, though this can vary based on the specific investment and the amount of the transaction. For instance, bond and CD transactions may have markups or markdowns up to 2% for buys and 0.75% for sells. Mutual funds typically have sales charges between 2.25% and 5.75%, depending on the fund type (fixed-income vs. equity) and any applicable volume discounts (breakpoints).
- Advisor compensation: Your Edward Jones financial advisor receives a portion of these commissions. This percentage can vary based on their experience, the type and amount of the investment, and any discounts.
Sub-heading: Fee-Based Accounts (Advisory Programs)
In a fee-based model, you pay an ongoing fee, typically a percentage of the assets under management (AUM), for advisory services. This means the fee is charged regardless of how many trades you make.
- How it works: Edward Jones offers advisory programs like "Guided Solutions" and "Advisory Solutions." Instead of per-transaction commissions, you pay an annual program fee based on the market value of the assets in your account. This fee is usually assessed monthly, in arrears.
- What you pay: The annual program fees typically start around 1.40% to 1.50% of your AUM, with lower tiers and reduced rates for higher asset levels. For example, Guided Solutions may have an annual Program Fee of 1.35% and a Platform Fee of 0.05%. These fees cover ongoing portfolio management, advice, and potentially rebalancing services.
- Advisor compensation: A portion of these asset-based fees is paid to your financial advisor. The payout level can depend on the average daily total asset value of advisory assets and any discounts.
Step 2: Delve Deeper into Specific Investment Fees
Beyond the overarching account types, individual investments held within your Edward Jones account can have their own set of fees.
Sub-heading: Mutual Fund Fees
Mutual funds are a popular investment choice, but they come with multiple layers of costs.
- Sales Charges (Loads): As mentioned, when you purchase mutual funds through a commission-based account, you typically pay an upfront sales charge (Class A shares) or a deferred sales charge (Class B or C shares). These can range significantly.
- 12b-1 Fees: These are ongoing distribution and service fees paid by the mutual fund company to firms like Edward Jones for marketing and distributing their shares. They generally range between 0.25% and 1.00% annually and are built into the fund's expense ratio, meaning they reduce your investment's return.
- Expense Ratios: All mutual funds have an expense ratio, which represents the annual percentage of your investment that goes towards the fund's operating expenses, including management fees, administrative costs, and the aforementioned 12b-1 fees. These are not Edward Jones' fees directly, but they are a cost you bear as an investor in those funds.
Sub-heading: Fixed Income (Bonds, CDs) Fees
When dealing with bonds and Certificates of Deposit (CDs), Edward Jones may act as a principal or an agent.
- Markups/Markdowns: If Edward Jones acts as a principal (buying from their inventory and selling to you), they incorporate a markup (when you buy) or markdown (when you sell) into the price. These can be up to 2% for buys and 0.75% for sells.
- Commissions: If they act as an agent (brokering the trade for you), they charge a commission, which will be disclosed on your trade confirmation.
Sub-heading: Annuity Fees
Variable annuities, which offer tax-deferred growth and often a death benefit, also come with their own set of charges.
- Commissions: When you purchase a variable annuity, you'll likely pay a commission, which can be around 5.00%, though breakpoint discounts can lower this.
- Trail Commissions: Edward Jones also receives ongoing "trail commissions" from insurance companies that issue variable annuities. These are typically around 0.25% annually and are part of the annuity's internal fees, impacting your overall return.
- Underlying Fund Expenses: Variable annuities invest in underlying sub-accounts (similar to mutual funds), which have their own expense ratios.
Step 3: Be Aware of Account-Related and Miscellaneous Fees
Beyond investment-specific charges, Edward Jones has various account-level fees and other miscellaneous charges.
- Annual Account Fees: For certain account types, particularly Individual Retirement Accounts (IRAs), an annual account fee may apply. For Traditional and Roth IRAs, this was $40.00 per calendar year, increasing to $75.00 per calendar year as of April 1, 2023. Additional IRAs for the same individual may have a lower annual fee.
- Money Market Fund Fees: If your Edward Jones Money Market Fund balance falls below a certain threshold (e.g., $2,500 for Investment Shares or $1,500 for Retirement Shares), you might incur a monthly fee of $3.00.
- Transfer and Termination Fees: If you decide to transfer your account to another firm or close it entirely, Edward Jones may charge a total transfer or termination fee, which can be around $95.00.
- Other Service Fees: This category can include fees for services like wire transfers ($25.00 domestic, $100.00 international), returned checks ($25.00), stop payment requests ($20.00), and estates service fees ($100.00).
- Private Investment Fees: A minimum annual private investment fee of $50.00 per calendar year per position can apply to certain holdings.
Step 4: Recognize the Impact of Fees on Your Returns
It's easy to look at percentages like 1% or 2% and think they're small, but the long-term impact of fees on your investment returns can be substantial.
- Compounding Effect: Just as your investments compound over time, so do the fees you pay. Even a seemingly small annual fee can significantly erode your wealth over decades. For example, a 1.35% annual fee on a $50,000 investment over 20 years, without any additional contributions, could result in tens of thousands of dollars less in your account compared to an investment with no fees.
- Reduced Growth Potential: Every dollar paid in fees is a dollar that isn't invested and therefore can't grow. Over a long investment horizon, this can make a dramatic difference in your final portfolio value.
Step 5: Ask Questions and Seek Clarity
Edward Jones is required to disclose its fees. The most effective way to understand what you will pay is to directly ask your financial advisor for a comprehensive breakdown of all potential fees for the specific accounts and investments you are considering.
- Request the "Schedule of Fees": Edward Jones provides detailed "Schedule of Fees" documents for brokerage accounts, IRAs, and other services. Always request and review these documents carefully.
- Understand Advisor Compensation: Ask how your financial advisor is compensated for the products and services they recommend. This helps you understand potential conflicts of interest. Edward Jones states their financial advisors generally receive between 36% and 40% of the revenue Edward Jones receives from asset-based fees, transactional revenue, and ongoing fees (like 12b-1 and trail commissions).
By following these steps, you can gain a much clearer picture of "how much Edward Jones takes" and make informed decisions about your financial future.
Edward Jones Fees: 10 Related FAQ Questions
How to Understand Edward Jones' Fee Structure?
To understand Edward Jones' fee structure, you need to differentiate between their commission-based (transactional) accounts and their fee-based (advisory) programs. Commission-based accounts charge per trade, while fee-based accounts charge an annual percentage of your assets under management.
How to Minimize Fees with Edward Jones?
Minimizing fees with Edward Jones often involves opting for their fee-based advisory programs if you have a larger portfolio, as this can be more cost-effective than frequent trading in a commission-based account. Additionally, be mindful of mutual fund share classes with high sales loads and consider investments with lower internal expense ratios.
How to Find Edward Jones' Full Fee Schedule?
You can typically find Edward Jones' full fee schedule on their official website under the "Disclosures" or "Account Fees" sections. Your financial advisor is also obligated to provide you with these documents upon request.
How to Compare Edward Jones Fees to Other Firms?
To compare Edward Jones' fees to other firms, look at their asset-based management fees (typically 0.25% - 1.00% for many robo-advisors or other traditional advisors), commission rates for specific trades, and any annual account maintenance fees. Factor in the total cost of ownership, including internal fund expenses.
How to Know if My Edward Jones Advisor is Fee-Based or Commission-Based?
You can ask your Edward Jones financial advisor directly whether they operate as a fee-based advisor (charging a percentage of assets) or a commission-based broker (earning per transaction). Most likely, they can offer both types of accounts, so understand which model applies to your specific account.
How to Calculate the Total Cost of My Edward Jones Account?
To calculate the total cost, sum up: (1) any annual account maintenance fees, (2) the asset-based advisory fee (if applicable), (3) commissions or sales charges from your trades, and (4) the expense ratios and 12b-1 fees of any mutual funds or annuities you hold.
How to Avoid Hidden Fees at Edward Jones?
There are generally no "hidden" fees as Edward Jones is legally required to disclose all charges. However, some fees might be less obvious than others, like 12b-1 fees embedded in mutual fund expense ratios. The best way to avoid unexpected costs is to thoroughly read all disclosure documents and ask your advisor for clarification on anything you don't understand.
How to Switch from a Commission-Based to a Fee-Based Account at Edward Jones?
If you currently have a commission-based Edward Jones Select Account and wish to switch to a fee-based advisory program like Guided Solutions or Advisory Solutions, discuss this with your Edward Jones financial advisor. They can guide you through the process, which may involve re-titling assets and signing new agreements.
How to Understand Advisor Compensation at Edward Jones?
Edward Jones financial advisors receive a portion of the revenue the firm earns from your account, whether it's through commissions on trades or a percentage of your assets in advisory programs. They also receive ongoing payments like 12b-1 fees and trail commissions from product providers. Their total compensation varies based on factors like experience and assets under care.
How to Get a Detailed Breakdown of Edward Jones Mutual Fund Fees?
To get a detailed breakdown of mutual fund fees, request the prospectus for each specific mutual fund you are considering or that you hold. The prospectus will outline all sales charges (loads), expense ratios, 12b-1 fees, and other internal costs associated with that particular fund.
