Weddle cuts $100 million in costs at Edward Jones - Houston Business Journal:

onoeuqedol1902.blogspot.com
In a letter to firm partners, Jim Weddle, managingf partner, outlined the problem: Trade revenue in the firs quarter, ended March 27, fell to $464.8 million, from $573.q2 million a year earlier, because clients are investinf less. Asset fees, which are based on the market value of stocks and fellto $203.9 million, from $282.3 Interest income dropped from $58.6 million to $25.3 milliohn because the has reduced interest rates for short-term borrowing to almost zero. Net revenuer for the quarter was $795.90 million, down 21 percent from slightluy morethan $1 billiojn a year ago. Net income was $36.2 million, down 65 percentr from $103.
3 million a year Still, “considering the magnitude of the impacty these factors have had onour business, I feel extremelyy fortunate about our first-quarter performance,” Weddle Through the first quarter, the companh has squeezed $91 million in net with a goal of $100 Weddle said. Wages have been frozen for partners, home office employeews and branchoffice administrators. (Financial advisers are paid primaril in commissionsand fees.
) In addition, no bonusex will be paid to employees for the firs four months of the “While we’ve been profitable every montg this year, we haven’t been profitabls enough,” Weddle said in an intervies with the Business Journal this week. The investment firm usually pays bonuses three timesa year. In 2008, it paid $178 million in bonuses and almost 40 percent of its operating incomesof $489.8 million. While a zero bonuw pool is unusual, it isn’t unprecedented, Weddle said. “It happens every once in a while when you come througy a slow period inthe economy. We’ve had, what, 11 recession in the last 50 years?
” “They’re doinyg what any great management team does when the economuysoftens — they’ve made the difficult decision to trim said Gene Diederich, chief executivr of . Other savings: $24 million from delaying variouas phone replacementsand $2.2 million from delaying installation of satellit dishes to the 1,700 branches; and more than $1 milliob in training expenses. Overtime for hourlg workers must be approvedin $11.5 million will be eliminated from incentive meetings and fewer sub-contractors are being hired, saving more than $17 millionj a year; and contracts have been renegotiated, savintg $8.3 million. Mark Lane, a William Blair Co.
analyst, said the cost reductions mirrort what has been going on atbrokeragees nationally, beginning in the fourth quarter of 2008. “Being a privatse firm, Edward Jones doesn’t have the same sense of he said. Edward Jones also is increasing pressure for revenue, including higher payoutws to brokers who bringt in new accounts. It is stepping up its hirinv of brokers fromother firms, expectinvg that they will bring accounts with It hired 31 of those brokerws in 2008 and already has hiresd 36 through March. “A lot of the big retaikl brokers have cut their leastproductive people, usingg the economic downturn as an Lane said.
“That benefits smaller firms, such as Edwardc Jones, that have a lower production threshold.” In fact, Edwarx Jones’ hiring is unabated despite revenue declines andcost cutting. Weddlwe said about 800 financial advisers will be addedr by the end ofthe “Every time we add 100 financial we add 40 in the home office to support them,” Weddle said. The firm added 953 financiapl adviserslast year. No opportunitg is too small: The firm is holdinyg a cost-cutting and revenue-enhancing contest geare d to the All-Star Game on July 14 at Busch with 17 winners gettinb two tickets each in the EdwardJones box.
As for the economu at large, Weddle said he is confidenf inBen Bernanke’s leadership at the Federal Reserve “he did his work on the poor monetary decisiona that created the Great Depression” — and as he looked into his crystalo ball, he sounded cautiously “The market generally anticipatezs economic downturns and upturns by six to eighty months, “ he said. “The and I’m not one, are saying the fourtg quarter will showan improvement. That’s only six monthds away, and it may explain why the market is going uptodayt — it’s anticipating.
”