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Edward Jones

In: Business and Management

Submitted By ecpc1357
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Edward Jones Case : Team One

In facing fluctuating markets, emerging competition, and evolving industry platforms, Edward Jones must continuously strive to maintain its strong brand status while steadily expanding its business. Its mission to build long-term relationships with clients big and small and provide excellent, comprehensive service from dedicated advisors has been the backbone of its success. The challenge Edward Jones faces is how to ensure it will increase its market share and be competitive in light of recent industry changes and uncertainties while upholding its client satisfaction. One strategic initiative presently contemplated is to reduce company costs by consolidating financial advisors in 5-10 person offices in large metro areas. While this strategy offers some benefits, we believe the opportunity costs outweigh the cost savings. Therefore Edward Jones should not proceed and consolidate existing offices in large metro areas. Currently, Edward Jones has 8,205 branches located in large metro areas. 70% of them are located in locations where there are more than 10 offices in the area, each office has one advisor and one BOA on average. If we were to consolidate these offices, we would close a total of 2462 offices and build 492 new larger offices. (See Appendix 1) We would put 5 advisors in one office while decreasing the number of BOAs to 3 per large office. From this, our expenses, including rent, utilities, and BOA salary will decrease by $68,650,000 - 1.56% reduction of total operating expenses annually. (See Appendix 1) While the reduction of these expenses will free up additional cash for the company, we must analyze the overall impact these consolidations will have on the firm’s long-term goals, core values, and competitive advantage. One way the company has gained customer loyalty and satisfaction throughout the years is the convenience and warm atmosphere it creates for clients. Offices are spread in local, easy access areas where clients can stop by anytime. In addition, Edward Jones’s open-door policy creates a personal connection between advisors and clients. By removing these easy access offices Edward Jones risks its brand reputation of being customer centric. Large metropolitan areas in the U.S. have many traffic issues. Not only will clients travel longer distances to meet with advisors, it will take them considerably longer to do so. This inconvenience and burden might reduce overall client satisfaction while opening the door to other major competitors in the area who will try to capture these clients. Moreover, clients can also choose other more convenient platforms to manage their investments, such as relying on online venues. Consolidation will create another issue facing EJ’s business model, which is to hire and train entrepreneurs who will succeed and stay with the company. Financial advisors’ freedom to run their business will be compromised if placed with other advisors in the same office. One important factor to the high advisor retention rate is that advisors have the opportunity to take ownership of their “own” business and are happy with this approach. “Financial advisors talked about the day a new financial advisor who had been based in their office during the Goodknight program left, as the happiest day of their lives.” (Case, pg. 7) How will advisors feel about having to pack up their belongings, closing the doors to what was their own business for many years, and asking their clients to drive to another location because the company wants to save money? Their reputation as well as the company’s is on the line. If we consider the high population density in these large metro areas, we realize that it is not only advantageous to have multiple offices, but also critical to the company’s future success. Not only can EJ serve the high number of clients in the area, but also advisors can draw in new clients in the area. Closing these offices will not only eliminate the opportunity to attract local clientele, but now the company will risk losing existing clients who are not as willing to drive the long distance in congested traffic to meet with advisors. For the moment, Edward Jones should not consolidate offices in large metro areas. What it can do to face the possible future need to reduce costs is to begin a small scale pilot program where it builds a few 5-10 advisor offices in large metro areas and analyze efficiency, customer and advisor satisfaction and retention, and overall strategy.

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Edward Jones Case : Team One

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Edward Jones Case : Team One

Appendix 2
Of >10 office segment (FA's per office) 10 9 8 7 6 5 4 3 2 1 Offices open 246 274 308 352 410 492 615 821 1231 2462 # of BOA's 5 5 4 4 3 3 2 2 1 1 BOA Cost $170,825 $170,825 $136,660 $136,660 $102,495 $102,495 $68,330 $68,330 $34,165 $34,165 Other Direct Per Office Cost Change in cost savings $6,036,172 -$3,086,518 $7,885,509 -$3,726,440 $11,270,935 -$4,650,325 $19,317,381 -$5,578,028 $59,560,827

Support HQ

Total Cost

Cost savings

$147,517 $1,150,250 $1,468,592 $361,499,271 $137,753 $1,035,225 $1,343,803 $367,535,443 $127,600 $920,200 $1,184,460 $364,448,924 $116,992 $805,175 $1,058,827 $372,334,434 $105,838 $690,150 $898,483 $368,607,993 $94,010 $575,125 $771,630 $379,878,928 $81,317 $460,100 $609,747 $375,228,602 $67,448 $345,075 $480,853 $394,545,984 $51,822 $230,050 $316,037 $388,967,955 $33,025 $115,025 $182,215 $448,528,782

$87,029,511 $80,993,339 $84,079,858 $76,194,349 $79,920,789 $68,649,855 $73,300,180 $53,982,799 $59,560,827 $0 -…...

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