Penny Pennington Leads Edward Jones Into Its 100th Year

By John Manganaro

Q&A October 28, 2022 at 05:14 PM

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Penny Pennington is the managing partner of Edward Jones and the sixth person to have served at the helm of the firm during its 100-year history.

In the role, Pennington is responsible for stewarding Edward Jones' strategic direction, working together with 50,000 associates across North America to make a positive impact in the lives of clients, colleagues and communities.

She began her Edward Jones career in 2000 as a financial advisor in Livonia, Michigan, and in 2006, Pennington was named a principal and relocated to the firm's St. Louis headquarters, where she held various leadership roles prior to her appointment to managing partner at the start of 2019.

On Monday, the Financial Industry Regulatory Authority announced that Pennington had been elected to its Board of Governors as a large firm governor.

In an extended interview with ThinkAdvisor, given while Pennington was in New York, the Edward Jones leader said she was proud and humbled to be at the helm of a firm with more branch offices throughout the United States than any other brokerage firm in the country. She noted the firm's annual revenue had grown from $16 million in 1977 to more than $12.3 billion today, thanks to the work of branch staffers and the firm's 19,000 financial advisors.

Pennington also emphasized how Edward Jones is investing billions in new technology infrastructure, digital initiatives and virtual business enablement tools — all designed to grow the firm's impact and deepen client and financial advisor relationships.

Clearly, Edward Jones faces tremendous opportunities, yet like any legacy enterprise with such an extensive history and footprint, there are challenges to surmount, as well. These include the typical competitive pressures facing all advisory and brokerage shops in a world in which consumer expectations are rapidly evolving, as well as more unique challenges facing Edward Jones.

Among these are allegations that the firm has underpaid and underemployed female advisors and otherwise engaged in biased hiring and promotional practices. Of course, Edward Jones is not alone in having a mostly white and male advisor force, and in fact the firm boasts better diversity figures than most of its industry peers.

In past interviews, Pennington has acknowledged the paramount importance of improving representation and inclusivity in the advisory industry, saying it is a clear and pressing priority for the firm.

Summarized below are some highlights from the new conversation with Pennington, in which she spelled out her understanding of why Edward Jones has found enduring prosperity, and how she and her partners can ensure the firm attains another century of client service success.

THINKADVISOR: With Edward Jones celebrating its centennial in 2022, how do you feel about this current moment for the firm, its clients and the broader brokerage and advisory industry?

PENNINGTON: It is such an exciting time for our industry and for our firm. Speaking to the industry at large, I believe we are, more than ever, coming to truly see and understand the needs of our clients. We are understanding where the longstanding gaps in our industry have been.

For example, you may have seen the recent J.D. Power research results that came out, showing only 14% of the clients of full-service advisors say they get comprehensive financial advice. That statistic represents a huge opportunity and a clarion call for our industry, across the board.

We have to serve our clients more responsively and deeply than ever before, because their lives are more complex than ever, and the world, financially and otherwise, is more complex than ever.

People's needs have moved away from trying to understand stocks and bonds and building a portfolio to instead focus on genuine planning — on creating a relationship with their advisor that is much more comprehensive and holistic.

We have to continue to evolve so that we can serve the client in the context of their broader lives, in the context of multigenerational families and their broader hopes and goals.

We have to speak to young people who are really confused right now about their own financial futures. We recently did an internal survey among millennial investors, and they told us unequivocally that the biggest financial concern they face is actually just confronting the scope of options they have when trying to invest and create a financial plan. They don't know what to do. It's a choice overload.

So, it is the responsibility of our industry to step up here, and the opportunity is incredible.

There are firms that continue to raise the bar, and we believe we are one of those, in terms of elevating the relationship with the client. We do well in J.D. Power's rankings because we listen to the voice of our clients, all the time. We know they are asking for more from us, and we know that we need to move with speed and urgency to address their emerging needs.

Can you describe these emerging client needs in greater detail and how the firm is responding to this moment?

We have the benefit of being able to listen to our clients and to our extensive network of financial advisors — the nearly 19,000 professionals who sit down across the desk from their clients every single day.

The main theme we hear from our people is that we need to deliver the most comprehensive support services possible — advice and guidance that relates to all things health, family, well-being, personal meaning and how the financial plan lines up with all of this.

As we celebrate our centennial, we are also celebrating a cultural renewal and a strategic transformation here at Edward Jones that is building on what is special about our history and culture. We are doing this because we hope and expect to grow to serve the needs of tens of millions of clients in the future.

Right now, we serve some 8 million clients, but in the emerging marketplace of holistic advice, we think our addressable market is actually closer to 40 million people. We believe the opportunity in front of us and our peer organizations is vast, but success will require delivering new advice and guidance that cuts across the full scope of the client's life.

We also know that it will require great technology in the front, middle and back of the organization. It will require great technology across the client experience and the branch experience.

If you look at our technology investments, we are looking for ways to make sure the clients always feel like they are informed about what impact the markets are having on their goals, and we are striving to make sure the financial advisors out in our branches are able to operate really efficiently and effectively, using the technology to understand their clients as deeply as possible.

Something else to point out is that we are opening up greater choice and flexibility for our financial advisors with respect to how they run their practices. For example, we are updating the ways our advisors can team up and operate collaboratively, bringing multiple advisors and branch staff together to be able to serve the more holistic and more complex needs of the clients. We have a lot of conviction that this is the right approach moving forward.

What is your view on why consumers have needs that are more complex and why they want more holistic support today compared with the past? Is it as simple as saying that life is more complicated?

A lot of it is the growing desire among clients for services and relationships that are not just transaction based or product based, and that's not just true in financial services. There is a broader consumer movement towards longer-term, experienced-based relationships with trusted brands.

It all reflects how they are engaging with other parts of the economy and services outside of the financial space. Think about the way people are engaging with brands that they trust and the tremendous success of organizations that provide consumers with an experience that keeps them curious and interested. I think investors are looking for this same type of experience and service with their financial advisors, frankly.

What is not going to change, I can say with confidence, is the hyper-locality of our business model. Ongoing success will demand that we remain really close to people, communities and families. Today we are in two-thirds of the counties in the U.S., and that is not going to change. We want to be seen in the community and to be engaged in the community.

Our people's hearts and passions are in their communities, and that is critical to our ongoing success. We strive to be community builders. Our advisors are in their communities serving on hospital boards and school boards, and they raise money for all kinds of social services organizations.

That's one way that people know that they can trust us. Our people are sitting side by side with them not just in client meetings but out there in the real world, building community. I'm so proud of our people for this. It's part of our business model and our culture, and it has been for decades.

Something that is changing is our effort to work even more closely and collaboratively with the different professionals that may be touching our client. We are working with the estate planning attorneys, the business attorneys, the tax professionals, etc. Our advisors are empowered to be that trusted hub of the wheel, if you will, that can coordinate the clients' bigger picture.

It's all about making sure the client service experience is not just a one-time, transactional thing. The advisory relationship continues over time, and it flexes and changes along with the needs of the client.

Do you think Edward and Ted Jones would have foreseen this move toward goals-based planning and more holistic service that goes beyond a transactional approach?

That's such an interesting question. You know, I was with a group of retired partners earlier this week, meeting with several hundred people. It was awesome. They are retired from our organization, but they come together once a year to talk about what is happening with Edward Jones. They really care about what we are doing with the brand and the legacy of the organization.

Frankly, they are one of my toughest audiences that I speak in front of in any given year. They ask the hard questions and they push on us. During the most recent meeting, we watched a short video interview of Ted talking about how his father had started the business and how he, as the second generation, came up with his vision for how to carry the business forward.

Remember, Edward Jones started the business in 1922 in downtown St. Louis. Ted describes the firm in its early days as really a wholesale brokerage business. It was originally a business that was not doing much business with the retail investor. The firm at the beginning was doing business with people who were already rich — people who already had a lot of money and a good understanding of the markets.

Ted said in that recorded interview that he didn't like that business model so much, because, in his words, he wanted to talk to people. Ted said he wanted to work directly with real people and support their growing businesses and lives.

That was back in 1963, I believe, when the interview was filmed. I think he did have a great foresight into what was coming, and that's why he built the business model the way he did.

Now that you are in at the helm, what lessons can you share about building and protecting a 100-year-old brand?

It's all about trust, and trust flowing in multiple directions.

A successful brand requires trust from the clients and trust from the people who work for the company. And, frankly, there has to be trust that the organization is financially stable and successful, so that it can reinvest and endure and thrive.

That's the way we think about stewarding the brand at Edward Jones. We have to ensure that the reason clients trust us is that we are there for them and that we put their interest first — and that we have a sense of integrity. That's how we hope our clients see us.

Today we can measure this with reputation score, and we watch that really carefully. We know what our score is at a given time and we know which direction it is trending and why.

We nurture the brand based on how our own colleagues' experience being part of our organization, as well. Our people see that their experience matters and that we care about their purpose and values.

I can add, too, that there are moments where this work of building trust really comes to the fore; for example during times of crisis, like what we saw happen in Florida this year with the recent hurricane.

Our people know how to respond to the needs of our own people. We had our colleagues going in and supporting each other immediately in the wake of the storm. Our people were dropping supplies in the hardest-hit areas to help our own people, and then our own people were immediately able to help provide those supplies to their clients and to their neighbors.

It was an amazing moment coming out of such a serious tragedy. I think our people showed that we care, and that really matters, both internally to our own people and externally in the marketplace.

I should also highlight the financial endurance of the partnership model. Look, we have been highly successful, financially, for 100 years. We have ups and downs, naturally, but we don't apologize for our success. The success comes as a result of the trust, of the brand we have built and the work we do for our clients and our colleagues.

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