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Edward Jones in 2006: Confronting Success

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andrew foulkes

on 3 April 2012

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Transcript of Edward Jones in 2006: Confronting Success

EDWARD JONES in 2006: Confronting Success Adrienne Botley
CEO Nicholas Foley
CIO Andrew Foulkes
CFO Jelena Nikolic
COO Hugo Tomasino
Executive VP Sales S W O T TRENGTHS
Extensive interviewing and training process
Everything done is to deliver value to the client - very personal
Partnership - employees could invest in and join partnerships based on performance
EAKNESSES
Lack of technology - do not offer online trading, just started using email, limited internet usage
Old school strategy
Older clients, lack of convergence
No high risk/high yield investment PPORTUNITIES
Complete firm coverage in US - increase in metropolitan areas
Implement online features and focus on offering new poducts
Focus on new types of clients - larger accounts HREATS
Behind on internet trading-focused direction of industry
Losing many employees to competitors
Little experience in offering bundled financial services
Industry Analysis “It’s time in the market, not timing in the market that counts”
Competition Traditional Brokerage Firms
Merrill Lynch
Accounted for 68% of the $321.8 billion securities industry revenue in 2005
Offer full range of products to their clients
Tiering of services provided to clients ALTERNATIVES Executive Summary Red Panda Consulting LLC P S T OLITICAL
Revenue Sharing
Along with other brokerages accused of accepting payments based on the volume of business placed with mutual fund companies
Settled regulatory class action suits for $202 million
CONOMIC
Exaggerated swings in trading volumes and stocks changed the way brokers were compensated by clients
Changes with retirement funds and social security IRA's offered to increase savings through tax incentives OCIAL
Shifting financial concerns from accumulating savings for retirement to distribution on assets
Extension of life expectancy
Increasing health care costs - require people to save more
Concerns of social security trust fund not meeting its obligations
ECHNOLOGICAL
E-trade
Information technology was a key driver of convergence
increased efficiency of operations and multiple products to be sold on a single platform
PORTER'S FIVE FORCES Online Brokerage
Focus on clients with larger accounts
Take risks - cater toward day trading, hedge funds, and derivatives
Reform recruitment and training procedures - train more FAs
Incentive programs to recruit with industry
Consolidate business and expand within the US market before focusing on expansion overseas

E RECOMMENDATIONS Focus on exapanding business to attract more high net worth clients
Online Brokerage
Buyer Power Ability to choose from many companies
FAs must cater to the needs of clients Supplier Power (High) (Low) Suppliers becoming competitors Threat of Entry Entry into market is easy
Difficult to build reputation
Profitable market and industry (Medium) Threat of Substitutes (High) Day Trading
Customers trading onlines by themselves Competition Banks
Wells Fargo
Only 8% of consumers bought investment products from banks in 2002
Leverging its huge database
Offer personalized services Discount Brokers
Charles Schwab
Emerged after abolition of regulation regarding fixed commissions in 1975
Limited personal service
Offer online and broker-assisted trading Financial Planners
Ameriprise
For $500, a planner would build an annual plan for customer
Assets performing poorly Broker-centric
LPL, Raymond James
Treat broker rather than end consumer as the client
FA's are independent contractors
0.2 full-time employees to support a FA (1.45 for Edward Jones)
Freedom to run own business Mutual Funds
Fidelity Investments
Became competitors and suppliers
Annual fee and no up-front charge
Online services Insurance Companies
State Farm
Encouraged agents to become licensed brokers
More incentive to sell insurance than stocks Online Broker
TD Ameritrade
Success during internet boom
Consilidation after internet bubble burst
Customer can interact with staff even if they do not have a personal broker Company Analysis Started in 1922 by Edward Jones Sr., Edward Jones Investments had achieved the rank of 4th largest broker in the US by the end of 2006. By adhering to a fundamental strategy based on the core principles of close client relationships, focus on long-term diversified investments, and accessibility of services Edward Jones was able to offer superior service and performance. However, with the changing landscape of the financial services industry Edward Jones must evaluate and adapt its core values to maintain its competitive advantage. By amending the firm’s strategy to evolve pursuant to the direction of the industry Edward Jones may be able to achieve its corporate goal of growing their business to 17,000 financial advisors by 2012, but still maintain the personal client relationship-focus that has set the firm apart from its competitors. Questions?
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