Edward Jones is redefining the way its advisors work with clients on retirement planning by encouraging them to be more like “friends with financial expertise,” according to the firm’s managing partner, Penny Pennington.

Pennington, who in January became the sixth managing partner in Edward Jones’ 97-year history, is responsible for the firm’s strategic direction.

The “friends with financial expertise” concept is among the feedback that Edward Jones recently got from clients planning for their retirement.

Pennington said senior leadership has “learned firsthand” how to better work with clients on their retirement needs through the session.

Edward Jones currently has around 18,500 advisors and around 7 million clients, she said.

“Several weeks ago, our management committee — the top 20 leaders in our firm — sat down in a two-hour session with our clients, small focus groups,” Pennington said at the Sifma Annual Meeting in Washington, D.C earlier this week.

“One of the things that should not have been surprising to us, but still hit us pretty hard, was how little they talked about the products and services that we offer. What they talked about instead was the relationship [with their advisors], and the characterization of the journey that they have been on as a very emotional one,” she said.

“And as one client said to me: ‘Penny, I don’t think of my financial advisor as a broker or an investment representative. I think of my financial advisor as a friend with financial expertise.’ So, what we heard in those sessions is helping us reshape how we’re journeying with our clients alongside them on this new retirement journey,” she added.

Following the tide of the megatrends

Pennington said several “megatrends” are also influencing how Edward Jones guides its advisors on working with clients on retirement planning.

These megatrends include demographics.

“Our clients talked about the fact that they’ve already outlived the age at which their own parents and grandparents passed away,” Pennington said.

Because life expectancy continues to rise, “investors are planning for at least a 20-year retirement, or maybe 30 or 40 years in retirement,” she added.

Another megatrend is the diminishing availability of employee pensions, according to Pennington.

“We know that pensions — once a phenomenon of the Fortune 500 and other companies — are all but gone. In 1998, just 20 years ago, 60% of the Fortune 500 had a defined benefit pension plan. Today, it’s only 16%,” she said.

Pennington said “that doesn’t necessarily mean that today’s retirees [and] tomorrow’s retirees are going to be poorer, but it does mean that self-reliance is even more important.”

Financial peace of mind

Increasingly, “financial peace of mind is so important” to people in their pre-retirement years, according to Pennington.

“As these clients were describing to us, they’re thinking about their health, their family, and their purpose," she said.

Health is indeed a huge factor in retirement because “health concerns can derail the best-laid plans,” she noted.

Health concerns can derail the best-laid plans ... we estimate 150,000 of our clients are afflicted with Alzheimer’s.
Penny Pennington
Edward Jones

Pennington said, for example, that there are around 5.5 million Americans with Alzheimer’s disease and that number is expected to grow to 14 million by 2050.

“We estimate that 150,000 of our clients are afflicted with this disease and we know from the Alzheimer’s Association that where diminished capacity shows up first is in the checkbook,” she said.

“With no current treatment or cure, it is one of the costliest diseases; [it] costs about $350,000 in lifetime care. And that doesn’t include the two family members that on average change their lives in order to care for a family member with Alzheimer’s,” she added.

Family dynamics also significantly impact retirement, Pennington said.

“We heard for years about the sandwich generation, those of us who might be taking care of older family members as well as children and thinking about how to navigate our own planning for retirement and our own future in that context,” she said.

“I saw this in my own practice where clients were having really challenging and very emotional conversations about how to manage the complexity of all of that,” she added.

Pennington began her Edward Jones career in 2000 as a financial advisor in Livonia, Mich. In 2006, she was named a principal and relocated to the firm’s St. Louis headquarters where she started holding leadership roles.

Meanwhile, Pennington said the sense of purpose pre-retirees or retirees are looking for should also be a key talking point for their advisors.

“What our clients tell us is that they don’t believe it’s the job of the financial advisor to find their purpose, but instead, the kinds of discussions they have with their financial advisors extend way past the stocks, bonds and mutual funds and protection products and to the meatier aspects of what they want their lives to be for the next five, 10, 20 or 30 years,” she said.

“So, we know that our clients are going to be coming to us asking us for help beyond the core financial services. They’re going to be asking us for help around making sense of Social Security, thinking about where I should live in retirement, starting a new career or a business. They’re looking for that friend with financial expertise that can be a Sherpa for them during this important milestone and beyond,” she added.

Jones' five-point guide

Pennington outlined the five things guiding Edward Jones and its advisors in helping clients with retirement planning:

  • The firm’s own mindset: Acknowledging that clients are “at least as focused on their well-being as they are on their wealth generation.”
  • Products and services: “What sort of products and services do we need to have and how do we need to innovate around those products and services?”
  • Support for the firm’s financial advisors: “How do we support them not only in the IQ of assessing risk tolerance and putting together a great financial plan by weighing complex tradeoffs and building great portfolios, but what about the emotional quotient of working together in that sort of intimate and trusted relationship with a client?”
  • Advocacy for the individual investor: “One thing that I think that we ought to do some good work on is increasing the prevalence of employer retirement plans.”
  • The role the firm and advisors play as connectors for their clients: “Connecting investors and families to sources of good advice outside of the financial realm.”

“We’re beginning to explore what it means to be in a new phase of retirement with our clients, but also what it means to be in a new phase of our industry, of our business and the job that we do for our clients,” Pennington said. “If we rise to that occasion, generations of investors will be stronger in America.”