- Review of: Edward Jones
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Edward Jones is a full-service brokerage firm. The service can work well for large investors ($10 million and up) due to the combination of competitive advisory fees and professional investment management. Most individuals will pay heavily in annual fees, compared with other, cheaper options.
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 more? To put it simply: no.
A full-service broker is someone who provides not only the capability to invest, but also many other things like tax advice and retirement planning, as well as extensive research and knowledge. Unfortunately, being a broker also means they do not have to follow the fiduciary standard.
What Is Edward Jones?
Founded in 1922, and based in Des Peres, Mo., Edward Jones is a financial services company that focuses its business primarily on individual investors and small businesses. The company is a full-service investment broker, which means that it provides investment management services, much more so than brokerage services for self-directed accounts.
The company serves about 7 million investors and has $914 billion in assets under management. With more than 12,700 branch locations throughout the U.S. and Canada, Edward Jones has the largest number of offices of any brokerage firm in the U.S.
How Does Edward Jones Work?
The main benefit of working with Edward Jones is the financial advisor. The company has more than 14,000 advisors who work with clients on a one-on-one basis to provide individual investment advice and management. Typically, Edward Jones assigns one financial advisor to each branch office, which is why the company has so many branches. The aim is to provide face-to-face services in as many locations as possible, in contrast to the growing industry trend of engaging clients with an all-online experience.
The financial advisor gets familiar with your financial situation and goals, then builds a customized investment strategy to help you. They construct a portfolio of stocks, bonds and mutual funds that are based on a long-term buy-and-hold strategy.
Investment selection strategy. They filter stocks based on geography, track record, balance-sheet strength and company size, then narrow the field down to those that they believe have sustainable competitive advantages, and then use valuation analysis to determine a fair price for the stock.
They use four different wealth management services based on your own needs and preferences:
Guided Solutions. This service enables you to do your own investing and trading but provides you with investment guidance on stocks, bonds, mutual funds and exchange-traded funds (ETFs).
Advisory Solutions. This is comprised of fund models, and you can choose from more than 90 research models containing a variety of mutual funds and ETFs. You can have a brokerage account, in which Edward Jones will provide you with investment recommendations, from which you can make individual selections.
Estate Planning and Trust Services. Edward Jones Trust Company works in partnership with local professionals and your financial advisor to provide services.
Client Consultation Group. Your financial advisor has access to a team of more than 5,500 professionals at the company’s home office, who provide deep expertise and extensive experience in specialized areas to help in managing your investments.
Commissions and Fees
Unlike Edward Jones, a discount brokerage might be a better alternative to control your own investments. Although they might offer fewer service options, they’ll no doubt also have lower fees.
With Edward Jones, you’ll have to pay a yearly account fee of $40 for all retirement accounts, which can be withdrawn directly from either your investment account or your bank account.
This makes Edward Jones a comparatively expensive option, 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.
Below are the fees for taxable accounts. It does not include the fees of the mutual funds/ETFs used within your account.
|Deposit Amount||Annual Fee|
Stocks — buying through dollar cost averaging — 2% of invested amount ($5.00 minimum)
IRAs — Annual Fee — $40
Possible Investments — Individual stocks, fixed income securities (corporate, government, municipal bonds, CDs, etc.); ETFs; mutual funds — balanced, growth, growth and income, and aggressive funds; money market funds; FDIC-insured bank deposit program.
What they don’t recommend: penny stocks, individual junk bonds, options or commodities, or positions that are deemed to be investment fads.
Account Types — Regular taxable brokerage accounts (individual and joint), traditional and Roth IRAs, Roth IRA conversions, SEP IRAs, Solo 401(k) plans, single owner defined benefit retirement plans, 401(k) rollovers, custodial accounts, trust accounts, 529 college savings accounts and Coverdell education savings accounts.
Account Protection — The Securities Investor Protection Corporation (SIPC) provides $500,000 of coverage for missing securities, including $250,000 for claims of cash awaiting reinvestment. Edward Jones purchases additional protection from underwriters at Lloyd’s. This policy covers only theft, misplacement, destruction, burglary, embezzlement or abstraction. Market losses are not covered by SIPC or the additional protection. The aggregate protection limit for all claims is $900 million. The FDIC provides insurance through the insured bank deposit program of up to $250,000 per depositor.
Clearing Agency — Depository Trust Clearing Corporation (DTCC).
Annual Fees — Edward Jones offers both commission- and fee-based financial products.
Commissions on individual trades are as follows:
The Program Fee for taxable accounts and traditional and Roth IRAs (account value/annual fee):
Minimum Deposit — There is no minimum deposit to open or maintain a brokerage account. There is, however, a $5,000 minimum to open a Guided Solutions Account.
- Local Branch Offices — They have more local branches than any other broker in the country, which is a nice benefit to have, even if you mostly do your investing online.
- Professional Wealth Management — You're getting the benefit of the investment experience of an investment brokerage that has been in the business for over 90 years. That's tough to beat with DIY investing.
- Passive Investment Platform — Since your money can be professionally managed, you're free to tend to other areas of your life, like your career or business, your family and your personal passions. Edward Jones can handle your entire investment life while you're busy with other things.
- Low Fees on High Balances — The annual management fee is 0.50% per year on account balances greater than $10 million. At that point, the fee is competitive with robo-advisors but offers much more personalized and customized investment services.
- High Fees — The investment management fees are over 1% per year, unless your portfolio is larger than $2.5 million. You can do better with either a robo-advisor or holding index funds in a discount brokerage account. Commissions on self-trades are not at all competitive with discount brokers. The high fees and commissions will discourage new and small investors.
- No Active Trading — If you're looking to trade securities actively, Edward Jones is not the platform for you. The high fees alone can make active trading extremely difficult to do profitably. It is essentially aimed at buy-and-hold investing.
- Discourages Certain Investments — The company does not provide investment advice on certain types of investments, including penny stocks, junk bonds, options or commodities. Along with the high commissions, this is not a platform to trade such investments.
- Potential to Churn Accounts — This isn't an issue that's specific to Edward Jones, but any full-service broker. Since the broker earns commissions on trades, there is a built-in incentive to trade the account more frequently to increase revenue. Of course, you could choose fee-based account management, which would result in a flat annual fee, rather than individual commissions. It also appears that the DoL fiduciary rule has the potential to limit or eliminate commissions, at least on managed retirement accounts.
For investors with up to $10 million in investable assets, we cannot recommend Edward Jones.
In today’s investment world there are much better lower-cost options. We have now robo-advisors that can manage your money for a fraction of the fees. Specifically, firms like Betterment or Wealthfront are more than suitable for individuals who don’t have complex investment portfolios. If you want access to a human advisor, we would recommend Personal Capital’s service over Edward Jones. Not only can they manage your money, but Personal Capital has a free personal finance app that’s top-notch.
While at first glance you might not think Edward Jones 1.35% starting fee per year is much, keep in mind that’s not including mutual fund fees that in total can put you at 2% or more.
It’s been said you should invest like your milk and keep it under 1%. Otherwise, for the amount you are paying, you need to make that much per year in the market just to break even. And if you are doing much better than 2%, the fees are a significant drag on your returns. Jack Bogle, the founder of Vanguard, has been quoted saying over a 50-year timeframe this difference in fees could eat away up to 70% of your returns.