Unlike many discount brokerages available online, Edward Jones is a full-service broker. So what really comes with this type of service, and is it worth paying a little more?
A full-service broker is someone who not only provides the capability to invest, but many other things like tax advice and retirement planning, as well as extensive research and knowledge.
What to Expect When Choosing Edward Jones
This is the type of service I was looking for as a new investor. As someone who hadn’t invested in anything before, I needed an expert with the knowledge to help me learn.
So when I first opened a Roth IRA with Edward Jones over 5 years ago, I was aware of the fact that I’d have to pay a higher price for full-service treatment, and I felt an in-person broker would be the best way to go.
An advantage to working with an Edward Jones’ advisor is that the recommendations and investing strategy is easy to understand. Their investing policy is pretty straightforward, so you can be sure you’re not only getting the best service, but gaining some knowledge of how to invest along the way.
While they offer a variety of portfolio options, including blue chip stocks and bonds, I chose to go with actively managed mutual funds. Under the Roth IRA umbrella, I’m able to invest in mutual funds that earn a pretty decent return and interest, all tax-free.
Even though Edward Jones approaches their clients in a more hands-on fashion, they won’t be in your face every day of the year. In fact, unless I call to ask for an update, my broker won’t get in touch with me except for twice a year.
Edward Jones Commissions and Fees
You’ll also have to pay a yearly account fee of $40 for all retirement accounts, which can either be withdrawn directly out of your investment account or your bank account.
This makes Edward Jones an expensive option compared, but if you need the extra guidance and full-service features, then this could be a good option until you learn the investing ropes for yourself.
|Commissions on Stock Trades||Annual Fee||Commissions on Reinvested Dividends|
|2% on investment amount||$40.00||2% on reinvestment amount|
If you’re investing with an Individual Retirement Account (IRA) like I am, here is the complete schedule of fees from Edward Jones.
What Your Investment Strategy Will Cost
When talking to your Edward Jones advisor, you’ll be able to determine the best investment strategy for your goals. They’ll ask you what you’re saving for and how much you’re willing to risk to reach that goal.
For me, I chose the dollar cost averaging method, which requires a steady but disciplined investment every month for many years. The majority of successful investments remain that way because you view it as a long-term investment.
I’m not trying to play the stock market game, so every month I put in the maximum amount that I can contribute to a Roth IRA and watch my investment consistently increase.
The point of this strategy is to make slow and steady returns over a long period of time, and take advantage of the market when it’s down, since dollar cost averaging allows you to buy lower-priced stocks with the same amount of money.
Conflicts of Interest
The biggest drawback to investing with Edward Jones is the fact that your financial advisor is paid on commissions. So they earn money when you:
- Buy or sell stocks
- Buy bonds
- Buy mutual funds that charge a sales load
This compensation system can lead your advisor to give you a biased investment strategy advice. For example, even if it’s in your best interest, your advisor has no incentive to recommend no-load mutual funds since they won’t make a commission from the sale.
Additionally, since they act as a transfer agent for the mutual fund company (by setting up a separate account with the mutual fund company that represents your holdings), they’re much more likely to recommend certain fund companies.
If they offer these fund companies preferential treatment, they’re paid part of the revenue share annually, per mutual fund position by the preferred mutual fund company.
Edward Jones Summary of Pros and Cons
- Local offices with in-person meetings
- Full service investing and customer service
- Easy to understand investment strategy
- View your account activity online
- Higher than average fees and investing costs
- Conflict of interest
- No access to online trading
In my experience — and for my needs right now — the added knowledge and expertise that comes with hiring a full-service broker is worth paying the 2% fee. Not only do I get to learn the ins-and-outs of investing, but I can contact my broker and ask him questions.
But I wouldn’t recommend it for anyone who is educated enough to DIY their investments, because you have to make enough of a return to cover the annual costs.
So, when it comes to what’s best for you, it’s important that you do the research and understand your financial needs. Only you will have your best interest at heart — no matter how good the investment or brokerage firm claims to be.