Edward Jones is a full-service brokerage that offers both traditional and Roth individual retirement account (IRAs). If you are considering opening an IRA with the firm, this is what you need to know, including the investments and services it offers, and the fees involved.
Edward Jones Overview
Edward Jones was founded in 1922 and is based out of St. Louis, Mo. One of the largest broker-dealers in the U.S., it serves over seven million investors and has more than 17,500 financial advisors.
- Edward Jones is a full-service firm suited for investors who need a financial advisor to impart investing advice.
- It offers traditional and Roth IRAs via commission or fee-based accounts.
- Make sure you understand how fees and commissions work before opening an account.
- Investing options include stocks, bonds, mutual funds, and exchange-traded funds (ETFs).
- Whether or not Edward Jones is the right choice depends on the quality of the advisor and their relationship with you.
Full-service brokers like Edward Jones employ financial advisors who offer advice to investors, for which they pay. This differs from discount brokers, where investments decisions are made by investors who do the research and sell and buy securities through an online account on their own. As a result, fees are much lower at discount brokers, such as Fidelity Investments and Charles Schwab Corp.
How to Open an IRA at Edward Jones
Investors who want to open a traditional or Roth IRA at Edward Jones need to find a local financial advisor. This shouldn't be difficult considering it has branches in 50 states. They are typically staffed by one advisor and an administrator.
To prepare for the first appointment, investors should think about why they are investing, gather statements, and bring questions to ask. The Edward Jones financial advisor will assess the investor's needs and create a tailored investment plan.
Choosing a Traditional Versus Roth IRA
A traditional IRA provides a tax deduction and tax deferral on any gains. When you retire, withdrawals are taxed based on your income tax bracket. A Roth IRA does not provide an immediate tax deduction, but all gains and withdrawals are tax free. The Edward Jones financial advisor will help you determine whether a traditional or Roth IRA is better.
Edward Jones does not offer online trading so to buy or sell securities you’ll have to call your advisor.
In 2019, investors can contribute up to $6,000 to a traditional or Roth IRA. A additional $1,000 catch-up contribution is allowed for investors ages 50 or older.
Depending on the tax filing status, traditional IRA contributions can be deductible even if you contribute to an employer-sponsored retirement plan. For example, single tax filers that are covered by a work retirement plan can deduct full contributions if their modified adjusted gross income (MAGI) is $64,000 or less.
Not every investor is able to contribute to a Roth IRA, and an Edward Jones advisor can help determine eligibility. Single tax filers can contribute the full amount if their MAGI is less than $122,000 and contributions are phased out once it reaches $137,000.
IRAs can be established on a commission or fee-based basis. Since Edward Jones is a full-service brokerage firm, its financial advisors can utilize many different investment options. Stocks, bonds, exchange-traded funds (ETFs), and mutual funds are among the choices available to clients. Financial advisors can help determine which investments are suitable for retirement accounts based on the client’s investment objective and risk tolerance.
The Advisory Solutions investment program is the Edward Jones managed account available to clients. These accounts charge an annual advisory fee instead of commissions. The Advisory Solutions have several asset allocation models that contain a broad range of vetted mutual funds and ETFs.
The Bridge Builder proprietary mutual fund lineup is exclusive to the Edward Jones Advisory Solutions program. Eight different sub-advised funds are available in a range of asset classes, including domestic stock, international stock, and fixed-income investments.
The Bridge Builder Core Bond Fund (BBTBX), for example, has a gross expense ratio of 0.36% and at the end of the first quarter of 2019 had an annual one-year average return of 4.69%. This is slightly higher than the benchmark Barclays Capital U.S. Aggregate Bond Index return of 4.48% in the same period.
Fees and Commissions
Traditional and Roth IRAs at Edward Jones have a $40 annual account fee. However, clients with total assets above $250,000 are exempt.
Commissions in the IRAs can vary, depending on the securities purchased. Stocks and ETF trades result in a commission of about 2%. Mutual fund commissions are dependent upon the share class. A-share mutual funds have a large up-front fee and C-share funds have a level fee structure.
The Advisory Solutions program requires a $25,000 account minimum and charges an annual fee ranging from 0.50% to 1.35% based on the amount of assets under management. The more you have, the lower the fee. You'll pay fund fees in addition to the annual program fee.
Edward Jones Versus the Competition
Edward Jones is very comparable to other full-service brokerage firms, like Morgan Stanley or Merrill (formerly Merrill Lynch). The real comparison would be the relationship developed by the financial advisor and the client.
Commissions and the advisory investment programs are also very similar to other full-service brokerages. However, the annual IRA account fee at Edward Jones is lower. For example, Morgan Stanley charges $75 per account for clients who enroll in e-delivery of documents and statements for their account(s), but it is waived for clients with at least $1 million in total assets with the firm.
The Bottom Line
Overall, Edward Jones is a viable option for investors who are looking to open a traditional or Roth IRA at a full service broker-dealer and willing to pay fees and commissions for receiving investment advice from an advisor. The most important factor is the quality of the financial advisor and the relationship with the client.