Merrill Lynch and Edward Jones are two major financial firms in the full-service arena that have been around for decades. While all full-service brokers strive to provide a very high level of service to clients, Merrill Lynch and Edward Jones take very different approaches to their business in many ways. Merrill is taking its training and sales force in a new direction while Edward Jones is sticking to a more traditional approach that has led to substantial growth in the past few years.
- Edward Jones and Merrill offer a number of financial services to their clients such as investment management, life and disability insurance, IRAs and CDs, qualified and non-qualified plans, banking services, and comprehensive financial plans.
- Edward Jones attempts to take a more personal approach to their clients, with its business model by staffing each office with just two people—a licensed broker and a branch office administrator who handles the administrative tasks.
- Merrill Lynch was bought by Bank of America after the 2009 financial crisis. Its extremely successful program "Merrill Edge" sought to compete with discount brokers.
- Bank of America split Merrill Lynch into two entities in 2019: Merrill, the wealth-management division of the bank, and Bank of America Securities (BofA Securities), which operates the investment banking division.
Origins and History
On Jan. 6, 1914, Charles E. Merrill opened his brokerage firm at 7 Wall Street in New York. His friend, Edmund Lynch, soon joined him, and the company was renamed Merrill Lynch the following year. Early on, the company made several prudent investments that paid off well, including RKO pictures and Safeway grocery stores. In 1941, the company merged with Fenner and Beane, a commodities and investment banking firm which became the first firm on Wall Street to publish an annual fiscal report.
In the 1950s, the company became a Big Board member of the NYSE. It went public in 1971 and continued its reign as the most significant investment firm of its kind until it was bought by Bank of America (BAC) in January 2009 during the financial crisis. In 2019, Bank of America split Merrill Lynch into two entities: Merrill, the wealth-management division of the bank, and Bank of America Securities (BofA Securities), which operates as the investment banking division.
Edward D. Jones founded Edward Jones in 1922 in St. Louis, MO. The first office was established in Mexico, MO ., and a second office was soon opened in Pueblo, Colorado. Edward Jones grew its business across the rural and suburban areas of the U.S. and Canada and also had offices in the U.K., before selling the operations there in 2009.
J.D. Power, the data analytics company, ranked Edward Jones the highest in investor satisfaction with full-service brokerage firms in 2021. Edward Jones also ranked the highest in 2002, 2005-2007, 2009, 2010, 2012, and tied in 2015.
Edward Jones has outlasted competitors such as A.G. Edwards to become the market-leading investment company among those brokers using a similar business model. Edward Jones caters to individual investors and small businesses, primarily in Middle America.
Differing Business Models
Both firms are full-service companies that seek to provide a comprehensive array of services to their clients, including investment management, life and disability insurance, IRAs and CDs, qualified and non-qualified plans, banking services, and comprehensive financial plans. But the similarities end there.
Edward Jones has taken a much more personalized approach in building business for its brokers, requiring them to pound the pavement in the subdivisions surrounding their offices and knock on doors to solicit clients. Edward Jones emphasizes personal service with its business model by staffing each office with just two people—a licensed broker and a branch office administrator who handles the administrative tasks. The broker is solely responsible for bringing in business to the branch. In this way, a broker runs their own office.
This model has worked for the company because it enables Edward Jones to establish a presence in locations where larger offices with multiple brokers would not be sustainable. For this reason, it's common to find branches located in small towns and other remote areas where larger firms are not willing to go. Edward Jones seeks to create a personal feel of doing business, like dealing with family. This model has allowed the company to thrive.
Edward Jones has more than 15,000 locations in the U.S. and Canada and a client base of 7 million people. The company is privately owned, which it believes gives it an edge because it makes decisions based on what is best for its clients rather than having to meet Wall Street earnings targets or be liable to shareholders.
Merrill, on the other hand, has been one of the largest and most important players on Wall Street since its inception. Many of its clients have been some of the biggest corporations and high-net-worth individuals in the world.
Currently, Merrill seeks to increase its wealth management business by integrating itself further with its parent, Bank of America. It hopes to create a "one-stop-shop," by offering banking and financial planning all under one roof.
In 2010, Merrill also started a discount brokerage service known as Merrill Edge. This platform was designed to compete with Charles Schwab (SCHW), E*trade, and other discount brokers that offer many additional services to their clients. Merrill did this to capture smaller investors who do not meet the investment minimums to be full-service clients. The target client base is individuals with liquid assets of $0 to $250,000. This service combines "the investment insights of Merrill Lynch plus the convenience of Bank of America banking."
After the financial crisis, from 2009 to 2012, Edward Jones' net revenue grew by a whopping 42% to top out at just under $5 billion in 2012. By 2020, Edward Jones' revenue was $10.1 billion. By contrast, Merrill only grew by 10% between 2009 and 2012, topping out at $13.8 billion. In 2020, Merrill generated $16.1 billion in revenue.
The Bottom Line
Edward Jones and Merrill represent two of the oldest and most established investment firms in the marketplace today. Prospective brokers and planners looking to get started in the business will find comprehensive training programs at both firms. Edward Jones offers complete back-office support plus a branch office administrator to new hires while Merrill provides an extended training program that offers mentorship from an experienced advisor as well as the backing of a large corporate bank.