1) Why do you think Edward Jones survived the financial crisis that has taken so many of its brokerage competitors? Why has Edward Jones performed so well for so long?
Edward Jones’ strategy was very different from its competitors in the industry and was focused on "serving the individual investor in a personal relationship." The corporate culture that developed over years let the firm gain a sustainable competitive advantage and distinguish itself from other brokerage houses (valuable, rare, inimitable, non-substitutable) The structure of Edward Jones had a steadfast focus on client. The firm was based on the authority of individual financial advisor and his one branch office assistant. The employed branch business model supported company involvement in local communities and allowed for face-to-face interactions. The model was rigidly standardized across all Edward Jones' offices. The company differentiated itself by establishing personal relationships with its clients. With the access to databases on the distribution of household net financial assets by neighborhood, Jones brokers targeted their clients on their own. They gained client base mostly through face-to-face interaction, referrals or local advertising. Since each office was conveniently located in high-traffic storefronts and designed in a way to make clients feel at home, the walk-in business was popular. With the business owner mentality and entrepreneurial spirit, individual financial advisors acted in the best interest of the clients. Core to Edward Jones' strategy was a down-to-earth conservative investing philosophy, emphasizing long-term, low-turnover investing and focusing on average American investors (the average account size is about $70,000). The firm entered into revenue-sharing arrangements with preferred product partners, such as American Funds, to offer best-performing mutual funds that matched Edward Jones' investing strategy (this also generated a significant income for the...
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