Edward Jones’ original business model Essay

Executive SummaryThis memorandum addresses some of the key issues with Edward Jones, which includes the perish out of an online presence, possible cannibalization from big unwaverings, and the inability to manage funds from institutional investors. I conclude that the most utile of all of the theorized strategies would be a combine of Edward Jones passkey business assume with an online platform. This picture would allow Edward Jones to balk true to its fundamentals, as well as tear bare-ass knobele and provide break process to its living clients.IntroductionEdward Jones has become the 4th largest brokerage firm in the fall in States. By holding on to a fundamental business strategy establish on the pith concepts of close client relationship and long-term investment focus, Edward Jones was sufficient to offer excellent service and consummation. However, with the intentness rapidly changing, Edward Jones must evaluate its core measure outs to sustain its compet itive expediency merely in a style that will allow them to expand its services, and keep to compete with the top players in the industry. signalize Issues and ProblemsWhen observing Edward Jones Financial, I found trinity unfavourable issues and problems with the firm. Edward Jones built its business model round creating an environment that would allow enterprisers to boom out and run their cause businesses to a certain(a) extent. This is what originally led to Edward Jones success when the association first started however, it is as well the catalyst for the issues of the firm that were present in 2006. Edward Jones three primary(prenominal) issues were the cannibalization of its business by bigger firms much(prenominal) as Merrill Lynch, customers leaving Edward Jones to manage their own money via online platforms such as E-Trade (MITR, 2014), and the lack ofability to manage high moolah worth funds that are typically present with institutional funds such as pens ions. Edward Jones built its business around meeting face to face with individuals in their homes and offices. This is a great model for an entrepreneur driven financial services firm. However, as the technology bubble began to burst in the mid 2000s, online brokerages such as E-Trade began to sequester customers away from Edward Jones. The lack of an online presence on Edward Jones part made companies that offered this service to a greater extent appealing due to lower fees (OBR, 2008).When examining introduce 5 (HBR,2007) , you can see that Edward Jones derived oer 83% of its revenues from commissions and revenue from fees. Whereas, E-Trade generated only roughly 34% of its revenues from these categories. This shows that, online brokerage was valueous to clients devoted that they could avoid expenses that were used to pay brokers, fashioning it a significant problem for Edward Jones. The make it major issue was that they were not suitable to manage institutional funds. Des pite construction an excellent company around operative with blue-collar individuals and families, it is clear that Edward Jones focus on the individual investor might flip been a significant problem.By only working(a) with individuals and not selling large amounts of stocktaking and bonds to institutional investors, Edward Jones passed up significant amounts of docile assets and subsequently, revenue. Exhibit 5 shows firms that were managing institutional investments such as pension funds had importantly higher(prenominal) moolah margins than Edward Jones. In 2005 Edward Jones profit margin was 1.05%, while Merrill Lynch and Morgan Stanley, were 27.8% and 26.33%, respectively. This also shows the average amount of assets in dollars per name at each firm. Edward Jones average assets per tarradiddle were $45,556 while Merrill Lynch & Morgan Stanley was $163,667 and $137,111 respectively. Edward Jones leaves revenue on the table by not managing higher net worth institutional a ccounts. uncommitted Strategic OptionsEdward Jones strategic direction in 2006 had to respond to competitors like Merrill Lynch if the partnership wanted to maintain its exceptional performance and growth. The first excerption focuses on staying true to Edward Jones small-town roots and demonstrating the value of strong individual(prenominal) relationships with ones financial adviser in planning for the dispersion shape of life (Faux, 2014). FAs can take wages of in the flesh(predicate) interactions and close relationships to communicate to clients the enormousness of planning for the distribution phase as soon as possible and hopefully encourage client referrals. Also, a pro advisor who in the flesh(predicate)ly knows the clients and their needs provides critical support to keeping long-term loneliness plans on track while chill out focusing on time-sensitive decisions. This defensive take up could stunt the firms growth, and if it fails, could leave Edward Jones even more vulnerable to cannibalization.The southward plectrum faultings the companys original policies of strictly face-to-face interaction to a hybrid model, which includes online account and portfolio introduce and authoritative news and look. This option adds value for brisk customers because they can view all of their financial culture in one billet at their convenience. Additionally, this technology offering creates a minimally viable product for fix affluent delegator and validator type investors, and then entices those clients with the added value of a personal financial advisor. This option also leverages the firms breathing research efforts into growing the business. The final option calls for a rapid involution to institutional clients in an attempt to compete straight off with competitors such as Merrill Lynch, Morgan Stanley, and Wachovia. The success of these firms indicates that expansion is possible. If Edward Jones does not expand, it will forgo effectiven ess market share and the attendant revenue. However, expanding as its competitors did would likely mean compromising many another(prenominal) of the firms established value and beliefs.RecommendationsI strongly recommend that Edward Jones shift to a hybrid model of face-to-face interaction combined with online account and portfolio tracking and access to current news and research in order to retain existing clients as well as attract new clients. This strategy enables the firm to stay true to its client-centric roots and positions the firm for growth. When clients have instant access to their financial information and the latest news and research, they feel better equipped to face complex distribution decisions. Potential clients in the post-Internet bubble solid ground expect basic technology offerings but also appreciate the benefits of a personal financial advisor. Being competitive in the future requires embracing technology as well astaking advantage of the firms close person al relationships with its clients.Works CitedOnline vs. Traditional Brokerage. Money Is The Root. N.p., n.d. Web. 08 Apr. 2014.Faux, Zeke. Edward Jones Trains schoolboyish Stockbrokers the Old-Fashioned Way.Bloomberg trading Week. Bloomberg, 30 whitethorn 2013. Web. 08 Apr. 2014.Stock Broker Account canalise Fees. Online Broker Review. N.p., n.d. Web. 08 Apr. 2014.Collins, David, and Troy Swith. Edward Jones in 2006 Confronting Success. Harvard Business Review. HBR, 21 Mar. 2007. Web.