Edward Jones top six garner cool $42 million

By Tim McLaughlin

ST. LOUIS POST-DISPATCH

04/01/2006



Pay for the top six partners at Edward Jones soared to $42 million last year as the Des ­Peres-based brokerage generated higher profits from the growing mutual fund and insurance assets of its customers.



Edward Jones on Friday disclosed the pay of its top partners and the company’s 2005 financial performance in an annual filing with the Securities and Exchange Commission. The pay of the top six partners rose 81 percent from about $23 million in 2004, largely because of their share of the brokerage’s climbing net income, the filing showed.



Overall, the brokerage’s 305 or so general partners received roughly 70 percent, or about $180 million, of the $256.7 million allocated to the group from the company’s net income. The balance is retained for the business.



General partners pay taxes on the earnings of the company, said Steven Novick, the top financial officer at Edward Jones.

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"We had a strong year," he said. "The industry has firmly recovered from the downturn (in the markets). We continue to see significant growth in our client assets and the number of clients we serve. That’s really supporting the increase in revenues."



The brokerage reported $3.14 billion in annual net revenue, up 11 percent over 2004. Income, before allocations to partners, surged 52 percent to $330 million.



Douglas E. Hill, a senior partner at Edward Jones, was the top paid partner, collecting



$7.8 million in total compensation in 2005. He received $1.8 million in 2004, but that amount reflects a $3.1 million reduction. Hill absorbed a disproportionate amount of the brokerage’s $75 million settlement with the SEC over inadequate disclosure of its relationship with some mutual funds.



James D. Weddle, who replaced Hill as managing partner on Jan. 1, received $6.8 million, up from $4.2 million in 2004.



In terms of net revenue, Edward Jones remains larger than cross-town peer A.G. Edwards Inc., which said earlier this week its fiscal 2005 net revenue rose 5.1 percent to $2.74 billion.



Both companies enjoyed a lift from the fees they receive for managing the assets of their customers.



“We’ve seen an increase in values due to the markets being more favorable,” Novik said. "Just as importantly, would be the fact that new money flowing into mutual funds and insurance products has increased."



Earlier this week, A.G. Edwards Chairman and Chief Executive Robert L. Bagby said in a statement that for the first time in his company’s history asset-management and service-fee revenue surpassed commission revenue on an annual basis. These fee revenues now account for 39 percent of the net revenue at A.G. Edwards, compared to 24 percent five years ago.



In 2004, Edward Jones and other financial services companies took a hit when the SEC and other agencies cracked down on them for inadequately disclosing their financial ties with mutual funds. The SEC penalized Edward Jones



$75 million for failing to disclose to investors that seven mutual fund companies paid to get on its “preferred” list.



The tougher regulatory environment and the class-action lawsuits that followed are reflected in Edward Jones’ legal expenses, which at $114 million in 2005 were more than quadruple the amount in 2003.