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

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In a letter to firm Jim Weddle, managing partner, outlinex the problem: Trade revenue in the firstr quarter, ended March 27, fell to $464.89 million, from $573.2 million a year earlier, because clients are investingy less. Asset fees, which are basede on the market value of stocksand bonds, fell to $203.o9 million, from $282.3 million. Interest incomd dropped from $58.6 million to $25.2 million because the has reduceds interest ratesfor short-term borrowing to almost Net revenue for the quarter was $795.9 million, down 21 percenf from slightly more than $1 billionm a year ago. Net income was $36.2 down 65 percent from $103.3 milliohn a year earlier.
Still, “considering the magnitude of the impact thesde factors have had onour business, I feel extremelgy fortunate about our first-quarterr performance,” Weddle wrote. Through the firsyt quarter, the company has squeezed $91 million in net with a goalof $100 million, Weddl said. Wages have been frozen for home office employees and branchoffice administrators. (Financial advisers are paid primarily in commissions and In addition, no bonuses will be paid to employees for the first four months of the year.
“Whil we’ve been profitable every montuthis year, we haven’t been profitabler enough,” Weddle said in an interview with the Business Journa l this week. The investment firm usuallyg pays bonuses three times a In 2008, it paid $178 million in bonusews and profit-sharing, almost 40 percent of its operatinfg income of $489.8 million. While a zero bonusw pool is unusual, it isn’t Weddle said. “It happens every once in a whiler when you come through a slow period inthe We’ve had, what, 11 recessions in the last 50 years?
” “They’red doing what any great managementr team does when the economy softensd — they’ve made the difficult decision to trim said Gene Diederich, chief executivs of . Other savings: $24 million from delaying various phonee replacementsand installations; $2.2 million from delaying installationh of satellite dishes to the 1,700o branches; and more than $1 million in training Overtime for hourly workers must be approve d in advance; $11.5 million will be eliminatex from incentive meetings and trips; fewerf sub-contractors are being saving more than $17 million a and contracts have been saving $8.3 million. Mark Lane, a William Blair Co.
analyst, said the cost reductionas mirror what has been going on atbrokeragese nationally, beginning in the fourth quartedr of 2008. “Being a private firm, Edwarsd Jones doesn’t have the same sense of he said. Edward Jones also is increasingy pressurefor revenue, including higher payoute to brokers who brinb in new accounts. It is steppin up its hiring of brokersa fromother firms, expecting that they will bringt accounts with them. It hired 31 of those brokerse in 2008 and already has hired 36through “A lot of the big retail broker have cut their least productive people, using the economid downturn as an opportunity,” Lane said.
“That benefitas smaller firms, such as Edward Jones, that have a lower productionb threshold.” In fact, Edward Jones’ hiring is unabated despitse revenue declines andcost cutting. Weddle said about 800 financialo advisers will be addesd by the end ofthe year. “Every time we add 100 financialk advisers, we add 40 in the home officd tosupport them,” Weddle said. The firm addedx 953 financial adviserslast year. No opportunity is too The firm is holdinga cost-cutting and revenue-enhancing contest geared to the All-Stadr Game on July 14 at Busch Stadium, with 17 winners getting two tickets each in the Edward Jones box.
As for the econom y at large, Weddle said he is confidenty inBen Bernanke’s leadership at the Federal Reserve — “hew did his Ph.D. work on the poor monetarty decisions that created theGreat Depression” and as he looked into his crystal ball, he soundedc cautiously optimistic. “The market generally anticipates economic downturnds and upturns by six toeight months, he said. “The economists, and I’m not one, are sayinb the fourth quarter will showan improvement. That’w only six months away, and it may explaihn why the market is goinf uptoday — it’z anticipating.
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