Consultant: How do Edward Jones and Merrill Lynch compare?

Merrill Lynch and Edward Jones are the two major full-service financial companies that have existed for decades. Although all full-service brokers strive to provide customers with a very high level of service, Merrill Lynch and Edward Jones have taken very different approaches to their business in many ways. Merrill is taking its training and sales force into a new direction, while Edward Jones is sticking to a more traditional approach, which has seen substantial growth in the past few years.

Key points

  • Edward Jones and Merrill provide a variety of financial services to their clients, such as investment management, life and disability insurance, IRA and CD, qualified and unqualified plans, banking services, and comprehensive financial plans.
  • Edward Jones is trying to take a more personalized approach to its customers. Its business model is that each office has only two people-a licensed broker and a branch administrator who handles administrative tasks.
  • Merrill Lynch was acquired by Bank of America after the 2009 financial crisis. Its extremely successful program “Merrill Edge” attempts to compete with discount brokers.
  • Bank of America split Merrill Lynch into two entities in 2019: Merrill Lynch, the bank’s wealth management arm, and BofA Securities, which operates the investment banking arm.

Origin and history

Merrill Lynch

On January 6, 1914, Charles E. Merrill opened his agency at 7 Wall Street in New York. His friend Edmund Lynch soon joined him, and the company was renamed Merrill Lynch the following year. In the early days, the company made a number of prudent investments and reaped substantial returns, including RKO Films and Safeway grocery stores. In 1941, the company merged with Fenner and Beane, a commodity and investment banking company, and became the first company on Wall Street to publish an annual financial report.

In the 1950s, the company became a member of the large board of directors of the New York Stock Exchange. It went public in 1971 and continued to be the most important investment company of its kind until it was acquired by Bank of America (BAC) in January 2009 during the financial crisis. In 2019, Bank of America split Merrill Lynch into two entities: Merrill Lynch, the bank’s wealth management arm, and BofA Securities, which operates as an investment banking arm.

Edward Jones

Edward D. Jones founded Edward Jones in St. Louis, Missouri in 1922. The first office was established in Mexico, Missouri, and the second office was soon opened in Pueblo, Colorado. Edward Jones developed business in rural and suburban areas in the United States and Canada, and had an office in the United Kingdom, before selling the business to the United Kingdom in 2009.

Data analysis company JD Power ranked Edward Jones as the company with the highest investor satisfaction with full-service brokerage firms in 2021. Edward Jones also ranked highest in 2002, 2005-2007, 2009, 2010, 2012, and tied for 2015.

Edward Jones has surpassed competitors such as AG Edwards to become the market-leading investment company among brokers using similar business models. Edward Jones mainly targets individual investors and small businesses in Central America.

Different business models

Both companies are full-service companies designed to provide their clients with comprehensive services, including investment management, life and disability insurance, IRA and CD, qualified and unqualified plans, banking services, and comprehensive financial plans. But the similarities end there.

Edward Jones

Edward Jones took a more personalized approach to building business for his brokers, asking them to knock on the sidewalks in the partitions around the office and knock on doors to solicit customers. Edward Jones’ business model emphasizes personal service, with only two people in each office-a licensed broker and a branch administrator who handles administrative tasks. The broker is solely responsible for bringing business to the branch. In this way, the broker runs his own office.

This model works well for the company because it allows Edward Jones to establish business in unsustainable locations in large offices with multiple brokers. For this reason, it is common to find branches in small towns and other remote areas where large companies are reluctant to go. Edward Jones strives to create a personal feeling of doing business, just like dealing with family. This model allows the company to flourish.

Edward Jones has more than 15,000 outlets in the United States and Canada and has a customer base of 7 million. The company is privately owned, which it believes gives it an advantage because it makes decisions based on the most beneficial way for customers, rather than having to meet Wall Street’s profit targets or be accountable to shareholders.

Merrill Lynch

On the other hand, Merrill Lynch has been one of the largest and most important participants on Wall Street since its establishment. Many of its clients are some of the largest companies and high-net-worth individuals in the world.

Currently, Merrill Lynch seeks to expand its wealth management business through further integration with its parent company, Bank of America. It hopes to create a “one-stop shop” by providing banking and financial planning under one roof.

In 2010, Merrill Lynch also launched a discount brokerage service called Merrill Edge. The platform is designed to compete with Charles Schwab (SCHW), E*trade and other discount brokers that provide many additional services to their clients. Merrill Lynch is doing this to attract small investors who do not meet the minimum investment requirements to become full-service customers. The target customer group is individuals with current assets ranging from 0 to 250,000 US dollars. This service combines “Merrill Lynch’s investment insight with the convenience of Bank of America’s banking business.”

Recent growth

After the financial crisis, from 2009 to 2012, Edward Jones’ net income increased by 42%, reaching a peak of slightly less than US$5 billion in 2012. By 2020, Edward Jones’ revenue will be 10.1 billion U.S. dollars. In contrast, Merrill Lynch grew by only 10% between 2009 and 2012, reaching $13.8 billion. In 2020, Merrill Lynch generated 16.1 billion U.S. dollars in revenue.

Bottom line

Edward Jones and Merrill represent the two oldest and most mature investment companies in the market today. It is hoped that potential brokers and planners who start this business will find comprehensive training programs in both companies. Edward Jones provides complete back-office support and branch administrators for new employees, while Merrill provides extended training programs, guidance from experienced consultants, and support from large corporate banks.

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