Merrill Lynch and Edward Jones are two major financial firms in the full-service arena that have been around for decades. While all full-service brokers strive to provide a very high level of service to clients, Edward Jones and Merrill Lynch take very different approaches to their business in many ways. Merrill is taking its training and sales force in a new direction while Edward Jones is sticking to a more traditional approach that has led to substantial growth in the past few years.
Origins and History
On January 6, 1914, Charles E. Merrill opened his brokerage firm at 7 Wall Street in New York. His friend, Edmund Lynch, soon joined him, and the company was renamed Merrill Lynch the following year. Early on, the company made several prudent investments that paid off well, including RKO pictures and Safeway grocery stores. In 1941, the company merged with Fenner and Beane, a commodities and investment banking firm which became the first firm on Wall Street to publish an annual fiscal report. In the 1950s, the company became a Big Board member of the NYSE. It went public in 1971 and continued its reign as the most significant investment firm of its kind until it was bought by Bank of America (BAC) in January 2009 during the financial crisis. In 2019, Bank of America split Merrill Lynch into two entities: Merrill, the wealth management division of the bank and Bank of America Securities (BofA Securities), which operates as the investment banking division.
Edward D. Jones founded Edward Jones in 1922 in St. Louis, Mo. The first office was established in Mexico, Mo., and a second office was soon opened in Pueblo, Colorado. Edward Jones grew its business across the rural and suburban areas of the U.S. and Canada and also had offices in the U.K., before selling the operations there in 2009.
J.D. Power, the data analytics company, ranked Edward Jones the highest in investor satisfaction with full-service brokerage firms in 2019. Edward Jones also ranked the highest in 2002, 2005-2007, 2009, 2010, 2012, and tied in 2015.
Edward Jones has outlasted competitors such as A.G. Edwards to become the market-leading investment company among those brokers using a similar business model. Edward Jones caters to individual investors and small businesses, primarily in Middle America.
Differing Business Models
Both firms are full-service companies that seek to provide a comprehensive array of services to their clients, including investment management, life and disability insurance, IRAs and CDs, qualified and nonqualified plans, banking services, and comprehensive financial plans. But the similarities end there.
Edward Jones has taken a much more personalized approach in building business for its brokers, requiring them to pound the pavement in the subdivisions surrounding their offices and knock on doors to solicit clients. Edward Jones emphasizes personal service with its business model by staffing each office with just two people—a licensed broker and a branch office administrator who handles the administrative tasks. The broker is solely responsible for bringing in business to the branch. In this way, a broker runs their own office.
This model has worked for the company because it enables Edward Jones to establish a presence in locations where larger offices with multiple brokers would not be sustainable. For this reason, it’s common to find branches located in small towns and other remote areas where larger firms are not willing to go. Edward Jones seeks to create a personal feel of doing business, like dealing with family. This model has allowed the company to thrive.
Edward Jones has 14,000 locations in the U.S. and Canada and a client base of 7 million people. The company is privately owned, which it believes gives it an edge because it makes decisions based on what is best for its clients rather than having to meet Wall Street earnings targets or be liable to shareholders.
Merrill, on the other hand, has been one of the largest and most important players on Wall Street since its inception. Many of its clients have been some of the biggest corporations and high-net-worth individuals in the world.
Currently, Merrill seeks to increase its wealth management business by integrating itself further with parent, Bank of America. It hopes to create a “one-stop-shop,” by offering banking and financial planning all under one roof. Statistics from January 2019 show that only 6% of Bank of America’s affluent clients have investments with Merrill. That means there is a tremendous growth opportunity for Merrill to access the remainder.
In 2010, Merrill also started a discount brokerage service known as Merrill Edge. This platform was designed to compete with Charles Schwab (SCHW), E*trade, and other discount brokers that offer many additional services to their clients. Merrill did this to capture smaller investors who do not meet the investment minimums to be full-service clients. The target client base is individuals with liquid assets of $0 to $250,000. This service combines “the investment insights of Merrill Lynch plus the convenience of Bank of America banking,” according to the site at the time. Though this was launched by Merrill, in 2019, the business is now under BofA Securities. The platform has grown from $45 billion to over $225 billion.
For new recruits, Merrill runs a training program for financial advisors called the Financial Advisor Development Program (FADP). It is a 43-month program that consists of five stages:
Training: Orientation and licensing and business and marketing plans
Development: Sales skills, goals-based wealth management, prospecting, and conducting meetings
Stage 1: Expansion on previous stages
Stage 2: Mastery of roles, tasks, and activities and advanced training on systems and tools
Stage 3: Advanced training on client service, systems, and tools
After the financial crisis, from 2009 to 2012, Edward Jones’ net revenue grew by a whopping 42% to top out at just over $5 billion in 2012. By 2019, Edward Jones’ revenue was $8.6 billion. By contrast, Merrill only grew by 10% between 2009 and 2012, topping out at $13.8 billion. By 2019, Merrill’s revenue had reached $23 billion.
The Bottom Line
Edward Jones and Merrill represent two of the oldest and most established investment firms in the marketplace today. Prospective brokers and planners looking to get started in the business will find comprehensive training programs at both firms. Edward Jones offers complete back office support plus a branch office administrator to new hires while Merrill provides an extended training program that offers mentorship from an experienced advisor as well as the backing of a large corporate bank.