Add Edward Jones to the ranks of firms that think a big part of appealing to wealthy clients is in offering access to private equity, credit and other alternatives.
The St. Louis-based wealth manager announced this week that it plans to provide a variety of private investment options through a deal with CAIS, which provides technology designed to unlock alternative investments for advisors and their clients. The service will be offered starting on May 5 through a business line called Edward Jones Generations, which is open to investors with $10 million or more in assets, but will eventually be extended to more of the firm’s clientele.
Russ Tipper, principal and head of products at Edward Jones, said it’s too early to say what the criteria for investing in alternatives will eventually be set at. Rather than choosing a fixed investable asset threshold for all accounts, Edward Jones is more likely to look at every client’s portfolio individually and decide if alts have a place.
“We want to make sure that we’re responsible using alternative investments,” Tipper said. “So we’re going to make sure it’s an appropriate portion of a client’s portfolio, which could be as little as zero to as high as 20% depending on the objective they’re trying to solve for.”
Edward Jones has roughly 9 million clients but doesn’t say how many have more than $10 million in investable assets. The firm’s clientele is served by more than 20,000 advisors overseeing roughly $2.2 trillion in assets.
“I think the goal is that it’s not just high net worth clients who are looking to benefit from access to private markets,” Tipper said. “And so while we’re starting in Generations, that’s where we’re starting, not where we’re going to end up.”
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Firms kicking private markets open
Edward Jones’ announcement comes amid a general push by wealth managers large and small to find ways to move clients into markets that for years had been the preserve of large institutions. Firms eager to work with ultrahigh net worth clients — a particularly coveted group because of the high fees they generate — are feeling the need to branch out from standard stocks and bonds.
Raymond James, for instance, announced in February that it had internally promoted Ken Novak to be head of private markets strategy within its wealth management unit as part of a push to ensure the firm can “meet the needs of advisors serving their most sophisticated and wealthy clients,” according to a statement. Raymond James CEO Paul Shoukry said in an earnings call last week that many clients remain wary of the barriers private equity funds and other private investments can have to taking money out. But demand for alternatives, despite concerns about illiquidity, continues to rise.
“The penetration is still relatively low,” Shoukry said. “It’s not for every client, even very high net worth clients. A lot of them like having liquidity. And these are, by definition, less liquid. But certainly there’s a growing appetite amongst clients and our advisors for these types of products.”
Similarly in an earnings call in January, LPL Financial CEO Rich Steinmeier told analysts that his firm had ended 2024 with 80 agreements allowing for the purchase of products from managers of private equity, private credit and other similar investment vehicles. Morgan Stanley meanwhile is starting a private equity fund open to millionaire investors.
Edward Jones is making its alternative investments through what it calls unified managed accounts. UMAs, part of the advisory services Edward Jones now provides for a fee, allow advisors to move assets into mutual funds, exchange-traded funds and other investments at their own discretion.
“UMA is our most flexible platform,” Tipper said. “It allows us to manage personalized portfolios across multiple vehicles, whether it be mutual funds, ETFs, separately managed accounts and now alternatives, and to be able to do intelligent rebalancing, overall tax management, tax transitions.”
Edward Jones’ place in the alts world
Loren Fox, the director of research at FUSE Research Network, which offers analysis and consulting on asset management, said so many wealth management firms are now offering access to private markets, it’s almost become table stakes. Edward Jones, he said, was in danger of being left behind.
“And it’s still the case that fewer than half of high net worth and ultrahigh net worth investors have alternatives in their portfolios,” Fox said. “So that’s a big growth opportunity for wealth management firms like Edward Jones, particularly when you are talking about firms that are coming from the more traditional investment space, that have their origins in the traditional investing world.”
For decades, Edward Jones has built its business on advisors serving so-called “mass affluent” clients typically with between $250,000 and $2 million to invest. Edward Jones advisors would most often work on their own in solo branch offices, usually in places far from the well-trod wealth centers where other firms compete for business.
Much of that has begun to change in recent years. Edward Jones, for instance, has followed its competitors in letting its advisors join teams. It also announced plans last fall to strengthen its presence in New York by opening an office in midtown Manhattan.
Tipper said Edward Jones has long had ultrahigh net worth clients, and the new alts offerings are merely part of a “journey to attract and serve” them like never before.
“We’re also making sure that we have robust product capabilities to serve the unique needs of high net worth clients, knowing that many of them can take advantage of liquidity premiums and some of the diversifying in return and income made available through private markets,” Tipper said.
Whence the demand for private markets?
Tipper said interest in alternatives is strong among both clients and advisors. Many see private markets as a way to diversify their portfolios using investments other than stocks and bonds.
Others are seeking higher returns — often through private equity or ownership stakes in private companies. Still another goal is to secure a steady source of income from private credit, or loans to private companies, or private real estate investment trusts, which let investors put money into apartments, offices and other types of property without actually having to own it.
“I believe alternatives are sold and not bought because we want people to understand their role in a portfolio and the impacts of illiquidity,” Tipper said. “I think clients are learning more and more about this space and are asking more questions.”
Fox, for his part, said he doubts much of the demand for private investments is from investors. The push, he said, is more likely coming from advisors and their firms.
“Maybe 15% of the demand is coming from your high net worth clients who have talked to friends or read an article or whatever,” Fox said. “Most of the time these are investments that are being presented to investors and sold to investors like most traditional investments. I mean, how many investors are asking on their own about traditional fixed income?”
Fox said Edward Jones’ move into private markets is clearly an attempt to keep pace with what other large wealth managers with growth ambitions are doing. Research his firm has conducted suggests that broker-dealers and independent advisory firms will have as much as $3 trillion committed to alternative assets by 2029, up from $1.37 trillion now.
A recent poll of roughly 160 financial advisors by the asset management giant Blackstone found that nearly 80% of the respondents plan to increase their allocations toward private markets this year. Just over half of the respondents said their top priority for recommending any type of investment this year was to diversify their clients’ portfolios.
Michael Becker, a partner at the St. Louis-based RIA Toberman Becker, said clients may not know much specifically about private investments. But they are often looking for ways to diversify their portfolios beyond stocks and bonds, particularly at times like the current period of economic volatility.
“And those who have the ability to stock with some sort of illiquid investment are going to get a different return profile,” Becker said.
Becker acknowledged most clients may not ask about private investments on their own. But woe to any firm that is presented with questions and fails to have answers readily at hand.
“It’s been talked about a lot more, so firms feel the need to offer that,” he said. “And if the firm doesn’t offer private investments, that’s probably a red flag for some clients.”
Fox said one advantage Edward Jones will reap from its partnership with CAIS, aside from easier access to private markets, will be services aimed at explaining alternative investments to both advisors and clients.
“CAIS has invested a lot in the educational aspects of private markets,” Fox said. “They have an array of educational programs, white papers, videos. It ranges from alternatives 101 to much more specific offerings on how individual products and opportunities work.”
Turning into a financial planning firm
The introduction of its Edward Jones Generations offering for high net worth clients is just one part of a push to broaden the firm’s appeal to a wider array of potential clients. The firm also recently announced an overhaul of its leadership ranks as a part of push to go beyond investment management and offer comprehensive financial planning.
Edward Jones also said Tuesday that it will start offering advanced planning services to high net worth clients being served by Edward Jones Generations. Investors with $10 million or more will be able to consult a team of experts on everything from cash-flow analysis and complex tax, estate or trust matters to business plans and philanthropic giving. That builds on the firm’s announcement in October that certain of its representatives could begin offering comprehensive financial planning for a flat fee of $3,600 a year to investors with $250,000 or more in their accounts.
Tipper said that although Edward Jones may be trying to appeal to clients on the upper end of the investable-asset scale now, that’s certainly not the center of its plans. The benefits of diversification and comprehensive planning extend well below the level of the ultrawealthy.
“This is about clients asking us how best to make their goals a reality, right?” Tipper said. “So if we can expand an opportunity set and have the ability to reduce risk or volatility, increase return opportunities, generate more income — this is just another capability for doing all of that.”
