Edward Jones

2. Can Edward Jones take advantage of the recent crisis in the brokerage business? What should it change in order to capitalize on the opportunities?

The brokerage industry is facing a crisis due to the consolidation of services being offered from financial institutions. In order to combat these changes, Edward Jones should 1) leverage their value-add resource of a strong personal relationship and 2) expand its financial services to pursue their own strategy of conservative convergence.

The industry convergence was being driven by the financial institutions themselves who found it cheaper to sell a new product to a current customer, than sell any single product to a new customer (p. 4). The downside of this consolidation is that many of those customers are now getting lost in the masses. In 2002, Merrill Lynch reduced 20,000 employees and introduced tiered service that meant only clients with assets over $500,000 would have a traditional relationship with a single broker (p.11).

Edward Jones can maintain a position of strength by continuing to offer their personal one on one brokerage services to all of their clients. Since the broker transactions are essentially identical, the value in the broker/FA comes from the advice and comfort one receives from that personal relationship. With 54% of the mass affluent investors, EJ’s target clients, being validators; there is clearly a strong desire by investors to have this one on one relationship.

Additionally, Edward Jones can expand their product/service offerings to include asset management, mortgage, insurance, and retirement planning. Each of these products fit into the personal, one-on-one relationship that the Edward Jones FA’s have built up over time. By selectively expanding into these products Edward Jones would be able to both expand their breadth of services without losing their identity as the face to face partner for individuals.