Penny Pennington on Wealth Management (Podcast)

through the ranks. If you are at all interested in things like asset management, financial planning, what it's like to run a giant firm with fifty employees and seventeen thousand financial advisors, who better than Penny Pennington. This is really just an absolutely fascinating conversation. There's a little bit of it that's kind of inside baseball, and and I'll let you guys in a secret. I treat these conversations as if it's a one on one and I just asked

the questions that I'm genuinely interested in. I learned a lot and I think you will too. So, with no further ado, my conversation with Edward Jones, Penny Pennington's This is Master's in Business with Barry Ridholts on Bloomberg Radio. My extra special guest this week is Penny Pennington. She is the managing partner of Edward Jones, a year old Fortune five hundred company. They have seven million clients and about one point three trillion in assets managed by forty

nine thousand associates. She is the first non family member to manage the firm, and she was ranked number thirty three in Fortune's Most Powerful Women in Business list. Penny Pennington, Welcome to Master's in Business. Thank you, Barry. It's great to be with you. Great to be with your listeners today, Really nice having you. You have both an interesting back round and an interesting career path. But I'm gonna jump

a little bit towards the ends. Tell us what was going on, oh eight oh nine, What was happening in the firm? How did you respond, How did clients react to suddenly you know, lots of people were pooh poohing the oh, it's no big deal, it's contained until it wasn't tell us what the great financial crisis was like, what were clients calling and worrying about? And then how does this version compare? It seemed people sort of learn

their lesson not to panic in O eight oh nine. Uh, that's that seems to be what at least the lesson was in. But what was your experience. Yeah, well, as it relates to clients and what they were experiencing. If you go back to eight oh nine, UM, the catalyst for the ignission switch, for that market volatility, what happened

in the global markets was a financial ignition switch. It was a meltdown in certain aspects of the financial markets, and as a result, the stock market, as we certainly remember UM did a deep dive and remained deep and volatile for some period of time. While the financial markets UM were to some degree rebuilt. Regulation was a part of that. UM new entrance and new new partnerships among

financial services companies were part of that. But the investing public UM got a got got UM a reminder of what significant volatility and a deep um reduction in the stock market felt like. And uh it took ten years to rebuild from that. The difference with the the effects of what I've called a triple pandemic over the past eight months or so is that the ignition switch had nothing to do with the economy or the financial markets.

It was a health crisis that was the ignition switch for a period of market volatility that was actually pretty short in February and March. We have had some more recent market volatility and we expect that that will continue. But the markets because for for a lot of reasons

that we could talk about, the markets actually recovered pretty significantly. However, the anxiety in the marketplace is still there, and anxiety for investors sometimes means that they question, uh, the way their portfolios are built, um, they become more risk averse, and very importantly, they turned to a financial advisor to help them make sense of all of that. So that was a common feature of oh eight oh nine for

for investors and how they responded. The common feature for us and our financial advisors and how we respond is to keep people focused on their long term goals and help relieve as much as we can um the anxiety that people are facing with market volatility, but this time with things like health crisis, loss of jobs, their kids and grandkids who are going through through significant changes in their lives. So sometimes I asked questions that I just want to know the answer to, Hey, how do you

create a consistent experience from advisor? Advisor even if they're in different offices. The portfolios might look similar, but how do you maintain that corporate culture. It's a really challenging question because it's you know, it's not an easy thing to do, especially during working from home. Our financial advisors and our branch office administrators are client service professionals. They

have been in the branch the whole town on. Our branches are very safe and we closed them to the public. So we've been meeting with clients, investors, and prospects by zoom and virtual means. But the financial advisors are in our branches and that really has helped. It's been a centering mechanism for them in a way. That's that's kept us all together. So that raises a really interesting question which I was going to ask later, but let me

ask now. Edward Jones has something like thirteen thousand branches, Is that right? They were all branches fifteen thousand, so I'm looking at old data. So all fifteen thousand branches were open and actually operating lights on during during the entire m during work from home during pandemic lockdowns. It wasn't open to the public, but you had people going

into those offices and turning on the lights. Absolutely. Most of our branches we have two to three people in the branch, so they are by their nature safe places. We could differ o our colleagues could be distanced from each other UM and we were deemed in essential services. So because of that, even during state by state lockdown, and boy, I remember the night that we got the news that Pennsylvania was locking down. That was the first state.

You know, just just a wave of emotion and a bit of oh my gosh, this is really happening, and this is going to happen across the entire country. And so we got set up very quickly, within a matter of hours and days UM to ensure that our branches could remain open, but also to ensure that our financial advisors and our b O as branch office administrator, the client service professional in each of our branches could work

remotely if they needed to or wanted to. So within a matter of about ten days days, we went from fifteen thousand remote connections available across our firm to fifty thousand remote connections. So while every single one of our branches has remained open, our colleagues can work flexibly and through through all kinds of virtual means like Zoom and Skype and webbex with with clients, investors, in prospects, and

with each other. So what do you think the impact of keeping fifteen thousand branches open has been, and let's talk about all of your essential communities. What do you think it's been on the local community, the employees, the clients, and and any perspective clients of seeing the lights on? Yeah, um, well, I believe and I've got evidence that proves um that that our clients and our perspective clients have seen those lights on and recognize that we are purpose riven to

be there for their well being. You know what what has been going on with clients and investors, the anxiety that that this pandemic, the economic downturn, and the social unrest have caused across our communities. That anxiety has impacted clients and investors. It's also impacted every single one of us who serves them. And so we've been going through

the same things that they have. But what being in the branch is, what being on the job at work for their benefit, for their well being has meant to us, is that we're doing something bigger than ourselves, despite our own personal anxiety. All of us have had to deal with all kinds of disruptions in our own lives, but we get out of bed every morning thinking about our clients and helping them reduce the anxiety in their lives. I'll tell you a real quick story, um and and

it's and it really is. An image it was sent to sent to me back the beginning of April from a branch in Florida where the branches were closed to the public, but our financial advisors and boas are in the branch. And the image that was sent to me was a client standing outside the branch with their hand pressed up against the window of the branch and one of our Edward Jones colleagues on the other side of that window, hand to hand with their client, just passing

back and forth. Good energy, Thank you for being there. We know you're there for us. And words didn't have to have to go back and forth, papers didn't have to go back and forth. That that was not the ethos that was being expressed. It was this, Uh. It was a convergence of love, of taking care of each other, of being in it together, of knowing why we're here, and that is to relieve the anxiety of our clients

and keep them focused on the long term. It sounds as if there are certain key values and certain key ideas you want to make sure every Edward Jones customer experiences or or am I putting words in your mouth? Should? Is it more variable from office to office, advisor to advisor? Yeah? I like the way that you said that, UM, the experience they have UM may be different in terms of the products, the services, the tools UM that they are

exposed to or that they're utilizing. That what is common is the outcome UM, that they achieve financially, whatever it is that's most important to them, and that they have the have this sense of well being as as we are helping them achieve that. So you raised a number of interesting points that I want to unpack one by one. Let's start with why you believe this particular cycle was so tight. Why was the downturn in February and March six weeks as opposed to oh eight or nine where

it was eighteen months, which by itself was relatively short. Yeah. Well, in large part it has to do with what the ignition switch was. UM. The the economy before the pandemic was fundamentally quite strong, a period of low interest rates, a period of very high employment, a period that fundamentally, UM was very healthy for the economy. Lots of people working,

and in our country, lots of people spending money. And since two thirds of our economy as driven by consumer spending in demand, when people spend money, UM, stocks are doing well and UH, and the market is fairly sanguine. That was the environment that we had before the pandemic. The environment that we had an O eight oh nine UH, we discovered was a little more fragile in terms of the fundamentals of the economy as well as the fundamentals

of the financial services industry. UM that caused a ripple when when it began to come apart, caused a ripple effect that we know now is global. So that really is the distinguishing difference. Now, UM, why UM, why we had relatively little volatility. Then at the beginning of the pandemic, we do have to look at the broad stock market indexes and realize that a few growth companies have performed exceedingly well, in large part because of the way that

they have served the consuming public and businesses during the pandemic. UM. I think the five or six highest growth stocks are up, you know, over the past six months or so, and the rest of the S and P five hundred is up far less and in some and on some weeks is down. So it's a pretty narrow market that is driving those, uh, those those broad benchmarks. So a lot of moving parts with how the contraction came about, how the economy recovered, what sectors are doing well. But I

want to focus on what you brought up earlier. You have over sevent financial advisors. How do you make sure everybody has the same client experience, whether it's portfolio management or customer service. How do you translate that army of advisors into one I don't want to call it uniform warm, but a consistent experience, a consistent interaction with Edward Jones, no matter where your office is, where your advisor is. Yeah, um, what what a what a great conversation that we can

have about that. So um, we have nineteen and a half thousand financial advisors. We were the largest firm in terms of number of financial advisors in our industry. Those financial advisors are spread across the United States and in Canada.

We have forty nine thousand colleagues all together Um, so we are all pulling in the same direction in terms of what drives us Barry, our purpose, what gets us up in the morning is making a meaningful difference in the lives of the clients that we serve, the seven million that we serve today and the tens of millions of more that that look like serious, long term individual

investors that we would like to serve. Now, you said, how do we ensure that every client is having the same experience, Well, actually we don't, because we we really focus on the humanity of each of our clients and discovering what it is that's most important to them, tailoring the experience to what they need, um providing to them as completely as we can a an experience that improves their financial well being, thereby their entire well being, and

the experiences that that that is rooted in that the emotions that that those experience are rooted in is a common factor in terms of what we're seeking to deliver. We know that our clients want to feel understood about what's most important to them, in full about how to achieve that financially uh and how they're progressing toward that in control. They want to feel like they've got some agency. Albeit no one's got control over the market, but some

some control and agency in their own lives. And we know when they feel those things that there's a sense of security and confidence about their long term path. So the experiences that we seek to deliver, family by family, individual by individual are all focused on helping individual clients and investors feel those emotions and and how that's achieved is through a deep trusted personal relationship with a financial advisor.

We don't have call centers, Um, we have financial advisors in in communities, working face to face, one on one with clients and their families. Huh. Quite interesting. So Penny, let's talk a little little bit about financial advisors. What what makes for a good financial advisor? And is that something that can be taught or is it you know

you either are or aren't. What makes for a good financial advisor is someone who recognizes that what we do is a balance of e Q emotional quotient emotional intelligence and i Q so knowledge that can be learned, expertise around the financial markets, around building a portfolio, around balancing

complex trade offs between among a client's goals. That's the EQ part of what we do, and there is Boy, there's lifelong learning associated with with the I'm sorry, with the i Q part, with the intelligence quota, there is lifelong learning a sciating with that, and UM bear your organization helps financial advisors and and folks in the financial

marketplace with that lifelong learning and insight and perspective. The EQ part is now more than ever and will continue to be a hallmark of what really great financial advisors do. The EQ part is being empathetic, recognizing that listening to another human being about what their hopes are, about what their fears are, and how those are changing over time,

how they're impacted, especially now by current events. Really generously listening UM to that on the part of another human being, and UM with with with that kind of empathy and with that sort of expertise, building up not only a plan, a financial plan, but building a plan based on relationship to keep people focused on their long term goals, notwithstanding the short term ups and downs that are part of that UM to keep people focused on the long term.

So empathy, generous listening, UM the process of of of thinking a short term to long term, All of those things make for make for the strength of a financial advisor and back to my earlier point about the i Q part of this, A lifelong learner someone who is really interested in continuing to dial up their own skills from an expertise standpoint, but also from from from an empathy and EQ standpoint. So let's stick with the concept of advisors. You guys are coming up on your hun

birthday not too far off in the future. You began as a brokerage firm, and in the early days most of your employees who were client facing were brokers. How has over the past century, how has that changed to what Edward Jones is today. Yeah, Well, it's a fascinating history and it's really one that's rooted in um recognizing what was scarce in the marketplace and boldly and sometimes of admittedly in a in a very unusual way, going

after serving that underserved market. So back in the fifties and sixties when Ted Jones are founder's son, recognized that the brokerage companies were all congregated in the large cities, but there was there were significant numbers of both with wealth and uh with with businesses and jobs where they were creating wealth who really deserved access to financial information, to products and services, to the ability to open an account and do a transaction in the financial markets, uh,

in a really seamless and person to person way. Ted Jones recognized that that was scarce. It was scarce in more rural communities, and so he went about building a distribution system that spoke to to those clients. Now fast forward to today. You know, as I say opening an account and doing a transaction with scarce, then it certainly is not. Today. That's not what's scarce, and that is not what what is is the definition of value today.

In fact, the ability to do a transaction in the financial markets is nearly a free good today, um, with zero commissions on trading and that sort of thing. Today, what is scarce is that hyper personalized, human centered relationship for tens of millions of people whereby they can get good advice in achieving what's most important to them. And that is across the arc of generations as well as across the arc of complexity of needs. And so we

don't have account minimums and we don't have account maximums. Um. We work with clients who are serious long term individual investors. That means UM, they value relationship, they want advice, and they're focused on the long term in their lives. Quite interesting. You followed Jim Wettle, who was the managing partner at ed Jones for thirteen years. He oversaw a giant rise in both clients and assets. Edward Jones is now one of the nation's biggest wealth management company. Those are some

pretty big shoes to fill. Yes, they are, and I feel it every day. If if you were in my office, uh and on the floor where where a number of our offices are there, there's some paintings down the hall and there are five paintings of our former managing partners. Are five former managing partners, including two whose last names were Jones uh then Doug Hill, John Bachman, Jim Wettle

and um. Right across the hallway from those those paintings is a picture of Ted Jones, who was our founder's son, our second managing partner, And it's a picture of Ted with his horse and a couple of dogs out on his farm and he's talking about what he loves and what he's grateful for. And those those uh, those paintings and that picture of Ted remind me every day that I'm in the office of what our roots are, what our values are, who we came from. Importantly, all of

our former managing partners were financial advisors. They sat with clients, building trust with clients. Albeit all the way back to nineteen two, there's a lot that changed about that, but

what's fundamentally the same is building trust with clients. And as you said, UM, my immediate predecessor, Jim wettele Um was the leader of tremendous growth and growth and impact and our firm that took us from a few thousand financial advisors to today, um, nineteen thousand financial advisors in every nook and cranny, every large city and suburb in

North America, in Canada and the United States. So following in those footsteps is it is an incredible responsibility, a great opportunity because what I learned from studying those former managing partners, they all looked forward boldly to the needs of millions of investors who we weren't serving yet, uh and took some some some pretty distinctive steps in order to serve them differentially. And perhaps we'll we'll talk some about some of that as week as we go along today.

That is definitely on my list to get to. Did you get to work directly with Wettell. Did you pick up anything from him? Oh? Yeah, but well picked up tons from him. So I was part of the management committee and executive committee while Jim was managing partner. Interesting story. I was a financial advisor in Michigan from two thousand

to two thousand and six. Jim was the managing partner who came in in two thousand and six and that year invited me to become a general partner in our firm and moved to St. Louis UH into home office leadership. And so had a ring side seat UM too Jim's tenure as managing partner, how he made decisions, how he

thought about opportunity. I also had a ringside seat to UH to our leadership team working through the Great Recession and the impacts of two thousand eight two thousand and nine on clients, on our industry, and on our firm. And boy taught me a lot about about decision making during crisis. And I've while we haven't had a playbook for what has occurred over the last eight months, I have drawn on those experiences UH to know how to

move forward. So full disclosure, we're recording this a few days after the election, but before the outcome is announced, so we have an inkling as to what might happens, but we really don't know for sure what the outcome is going to be. But let me ask you a couple of questions sort of in that in that area in my office before the election, that's all any client asked, what's going to happen? What does this mean for my portfolio? What does it mean for my taxes? On and on

down the road. What what sort of questions have you been getting from clients about the election? Is it an issue they care about or is it, you know, just another element that occasionally comes up. Oh sure, our experience has been the same as yours bury. You know, we've we've been around for ninety eight years, so through the the change of many many many administrations during that period

of time. And fundamentally, what's what's the same about those conversations is clients wondering, um, what what a potential change in and policy might mean for them, just as you describe, what we know over the long term is that very broadly White House policies are gonna help shape the economic terrain. History shows that the broader path has been pretty similar. Why is that because the nature of the US economy

because it is broad based, it is diversified. It relies on consumer spending and business investment, and while White House policy is going to affect those things, it doesn't dramatically swing those things one direction or another every four years. So again, we keep focused on the long term, recognizing that um that that policies may change with a new president, and policies may change if we if we continue with the president that we've had for the past four years.

Who knows what's going to happen in the in the coming days and weeks. Um, what we do expect is that the economy will continue to rebound. We have begun a rebound. We're not post pandemic. I'm not saying that, but we have begun a rebound in the economy, and we believe that that's going to continue. We do believe that we're not going to see a rapid snap back in to where the economy was pre pandemic. We do

believe that we're going to see more fiscal stimulus. We'll see the size or or or focus of that, depending on the administration. And then finally, we we know that that monetary policy will continue to be exceptionally accommodative. That means interest rates are going to be very low for quite some sometime. The Federal Reserve has has not only telegraphed that, they've been very explicit about that. M quite interesting.

One of the changes we did see with this administration was the possibility of the fiduciary rule being more aggressively imposed on things like qualified accounts for one case, and anything like that. If there is a change in administration, what are your thoughts as to what might change? What are your thoughts on the fugitial rule generally, well broadly, what I would say, Barry is that retirement security and helping investors have an experience that is that is more

helpful to them is a nonpartisan topic. It is one where we have seen a great deal of reaching across the aisles in the past couple of administrations. So we welcome an environment where we are partnering with our regulators and policy makers to help Americans have more retirement security and so access to retirements, say evings, vehicles, um. Regulation that that helps clients have more confidence that our industry

is operating in their best interests. All of those things, in one way or another, have been been dialed up over the past two administrations. I think that will continue to be a hallmark of the investing public's experience. There are different ways to get to that, and there are different types of regulations, UM, some much more specific, some much more prudential or principle based in nature. UM. But I have no doubt that our policymakers, legislators, and regulators

are going to continue to be focused there. Huh. Quite quite interesting. I know you've been pretty involved in trying to recruit a greater degree of diversity in in the workforce. At Edward Jones, I am the median financial advisor. I'm a white in my fifties. That's the vast majority of

the industry. What should we in the industry be doing to try and bring about more gender diversity, more people of color, just making less of of what's been dominating the industry, bringing a little diversity of thought and and a little bit of change. Yeah, well, UM, I think we've got to ask why is that important to do? UM? Let me let me share with you what our statistics are are. The average age of our financial advisors is forty five years old. Of our financial advisors are women.

A couple of percentage points higher than on average in our industry, and about nine of our financial advisors are people of color. Again maybe a point or so higher than than the average in the industry. But the reason that I share that is really to say that, um, two things. We we have been focused on this and on a path toward greater diversity for for a couple of decades. Um, we are not where we want to be. There is so much more opportunity, and so that gets

to the question of why is this important? Well, this is important because it is critical for the investing public to have choices about who who they are advised by, and to have a sense that the companies that that they are doing business with, reflect the environment around them, reflect who they are, that that investors and clients also have a sense of belonging belonging at that firm, with

that group of financial advisors. Now I am not saying that if you're a woman investor you always want to be served by a woman financial advisor, or if you're a black investor or client, that you want a black financial advisor or a white financial advisor. What my point is that that you have a choice, uh that you look at the faith literally of the organization that you are working with and say, you know that that place

is open to all. UM is eager to serve a diversified marketplace, and are the marketplace is becoming more and more diversified less homogeneous every single day. Uh. And so that's the big why why why diversity is such such a driver for our industry. And just as you said, our industry for too long has been more homogeneous in its makeup, and UM that that it will it will do us good. It is doing us good by looking at the marketplace we serve and reflecting the needs and

desires of that marketplace. So let's talk about a couple of more recent investing sings that have come along. Obviously, robo advisors were a big thing. They made a big splash pretty much around the financial crisis era, and they've expanded pretty rapidly over the past decade. What are your thoughts on automated investing and those sort of software driven advisors. Yeah, well, you know, you could go back to nineteen night in the nineteen nineties and look at online trading and the

advent of online trading during that period of time. As kind of the first robo advisor It wasn't exactly an advisor per se, but it was the ability UM to trade online. Goes back to Ted Jones saying, you know what what is where is the underserved market or what is the new innovation in the marketplace? And online trading came about, UM, it has proliferated and now UM you know through areas robot advisors includes more advice associated with

that trading because that's what investors are demanding. As I said earlier, the trade itself. Executing a trade in the marketplaces is nearly a free good, UH, and there's much more value to be delivered in providing advice. So the robot advisor as a way to do that. We know UM is appropriate for some investors. We believe that fifteen of the marketplace is appropriately self advised, and so robo advisors, UH, those that that have very little human interaction associated with

them are are appropriate for some clients. UM. Where where that begins to break down is when markets are sanguine, when things or seem easy, and when goals are straightforward in terms of the tradeoffs between and among goals, it's a little bit easier to take a hands off approach or to have that done in a in a mechanical way.

It's when markets become volatile, which happens unexpectedly when folks are are dealing with emotional and complex tradeoffs amongst things like you know, how do I say for for college for my child or grandchild and have a comfortable retirement at the same time. That's not just a mathematical question equation. Actually, it's a very emotional conversation about where where values go, about what those tradeoffs are going to mean to a

particular individual or a family. And that's where humanity is really important in terms of how we interact between financial advisor and client. H really interesting. So the nineties we had all that crazy online trading. You mentioned the transition to practically free. The modern era, we have apps like robin Hood, which supposedly millennials and other young people really are liking and engaging in a lot of active day trading.

Given that everybody's board and stuck at home. Um, what do you do when you have a client who is enthusiastically swinging cash around because they're bored? How do you manage that from from the perspective of Hey, everything we've talked about is long term, but but you're in and out of stocks every other day. Let's isn't that a risky behavior? How do you, as the long term advisor

manage that? Yeah, well, we go back to UM to what a serious long term individual investor is that someone who's values advice, who appreciates relationship, and who has a long term orientation. The valuing advice is Where that's going to come in is UM is sharing with clients and investors that beating the market. UM trading in a rapid way in order to time the market or time particular investment sectors. UM is not a not a particularly good

way to build wealth reliably over time. That can be proven. Uh and in fact, here's here's here's part of that proof. Clients who are advised by financial advisors on average have more assets than those who are not advised, and financial advisors share this kind of investment philosophy with clients. Diversification

is important. You can't beat and time the market on a on a daily or weekly basis, and you need to be focused on the long term putting money away, investing wisely and high quality investments, albeit rotating them and reallocating them as markets change. So UM, you know you know Verry you you probably have had this experience. Um, you have to say that over and over and over again.

That is part of the relationship and is part of the goodness of having a financial advisor, is that as a as a client, you are going to hear that advice again and again and again. Take the emotion out of it, stick to quality and to the long term. Huh. Quite interesting. So we were talking earlier about robin hood and people trading at home. Most of the data I've seen about what happens when a client passes away and the next generation inherits the wealth is that they tend

not to stick with the existing advisor. How do you manage that? What should advisors be doing so that when there is a generational wealth transfer, the next generation sticks with the company or the advisor they're working with. We

have to be relevant to the next generation. We have to have built a relationship with them where mom and dad or grandma and grandpa have a particular set of values, a particular set of goals, a particular type of portfolio that we know from working with multiple generations of clients that what that generation, what that that grandmother, grandfather, mother, father are really interested in is passing on their values to their children and their grandchildren. Now those values can

pass through the wealth. UM. But but it's it's more than that, isn't it. It's Uh, it's recognizing what that family desires to accomplish together and what that next generation is motivated by. And frankly, the millennials, that Gen xers

are motivated differently than their parents and their grandparents. And the goodness of the human relationship financial advisor to client in perspective client is it's the financial advisor's job to understand that, to find out what's important to that next generation, what their values are, what motivates them, and UM to help form a bridge between the values of the of the previous generation and the next generation. There's some really

important things happening. UH. And this this typically happens. Actually it's through research you can show it happens with the next generation quote unquote when there has been a significant and traumatic event in the marketplace, in the economy, uh, in society, and there's a significant impact on the risk appetite of of generations younger folks whose whose points of view about the world and society are being formed in in that crucible um, their risk appetite is affected, their

trust and institutions is affected, and their reflection on what's going to be important to them and going to be driving them for the rest of their life is affected. You know, the really classic one is folks who grew up during the Great Depression and our parents and grandparents who who we know and can can see from them how they live the rest of their lives based on those experiences. Uh that that's really the one that many

people point to. But people who are coming of age dur in the Great Recession and people who are who are being impacted today during their working lives, this is going to have a lasting impact on them, and so as financial advisors recognizing that digging deep into that with the next generation is going to help us help them be better investors and prepare for a very long life,

probably much longer than their parents or grandparents had. Quite interesting, whenever we see surveys of millennials, there is a very enthusiastic embrace of E s G investing or impact investing or socially responsible investing. I'm not so sure I've seen the dollar flows match that investing enthusiasm just yet, but it certainly seems like it's a trend that's developing, a work in progress. What are your thoughts on environmental, social

and governments investing E s G investing. Is this something that's going to have a lasting impact or the jury is still out? Yeah, it's such a rich topic of conversation in one that there's so much focus on in our industry and with investors right now. And fundamentally, what we're talking about is having our investment portfolios reflect our values as as individuals, whatever those maybe, UM, but lining up our our portfolios with our values UM. I think

in individuals, consumers are doing this broadly, aren't we. I mean you you you read a lot and see a lot and maybe it's your own personal experience that you're buying today according to your values. What research says that UM consumers are focused on brands that they see as being helpful during this pandemic UM, where they see local helpfulness, where they seem organizations that are are trying to be part of solutions that that is driving consumers to buy differently.

So you can expect that that's going to happen in the investment markets as well. When when you talk about E s G Investing. I do. I do want to note that sound Investing has always focused on companies and management teams that were uh there, that we're focused on the durability of their firms, that we're focused on on a wide array of stakeholders. Because if you don't do that as a company, um, you're probably not going to

be around for a long, long time. And so there are new labels that are put on at E. S. G. Green Investing, all kinds of things, UM that label this this type of fundamental orientation to multiple stakeholders and to the long term. But it is, I believe Mary, to your point, it is going to become an ever greater h point of emphasis for for younger generations as they as they grow into their investing lives. You mentioned earlier that we're in a low yield environment and probably lower

for longer. What does that do to people who are looking for income from bonds? What does that mean for the traditional sixty forty portfolio? Yeah, um, well, what it means is that a bond that you that you bought a decade ago in a very different interest rate environment was yielding to you a higher rate of income and very classically the sixty forty portfolio UM enabled you to live off of that income from that fixed income differently a few years ago than you would be able to today.

And so while the split of the portfolio may still be seventy thirty or sixty forty, and I don't want to get hung up on that split, those rules of thumb can sometimes be dangerous. The point is that fixed income and stocks, equities and bonds um form the basis of a diversified portfolio, and nobody has repealed the the fact that where you invest in non correlated assets, you are likelier to have a smoother ride during a volatile market.

And so fixed income or bonds and equities or stocks in the right measure for your risk appetite and your time horizon continues to be very important. However, living off the income of those bond onnes is gonna be a little more challenging than it was several years ago. Diversification remains very very important now. The flip side of a low interest rate environment is that a low interest rate environment generally correlates with a fundamentally strong stock market. Uh

and and we we've seen that over the past ten years. UM, So you don't don't don't despair completely in a low interest rate environment. There's some counter veiling benefits to that that kind of environment. So let's talk about some other non correlated assets. What do you think about alternatives such

as private equity or venture capital. Well, that's getting a lot of press these days because there is a significant portion, of a more significant portion of of businesses and capital formation that is happening outside of the public Mark our get and public companies um for the vitality of our economy, for the different ways that capital can be created and companies can be formed and scaled and grown. I think

that that's a very healthy thing. Um. What I think we have to be really thoughtful about is long term investors, is that the public market affords a kind of transparency into companies and access to to those companies and owning shares in those companies. That results in liquidity, that results in ways to verify the financials of those companies. That all results in a kind of transparency and reliability. That is a really important part of capitalism and about the

public nature of our stock markets. So flip that over and say that venture capital and private equity UM, while a really important part of capital formation, and our economy.

When when an investor gets all whipped up about returns that they see or read about or hear about in those markets, they have to recognize that that comes with a tradeoff, tradeoff of risk, a tradeoff of less transparency, different kinds of risks I liquidity, uh, different kind of risks than they see in the public markets, and so everything in moderation um and recognizing that broad diversification, asset allocation across a number of asset classes is what has

reliably grown wealth over time. So I know the data I'm about, the reference is old, but let me uh, let me play with it a little bit and tell me how far off I am. Your revenue has more than doubled from three point five billion to over seven point five billion not too long ago. It raises the question, what sort of practice areas are there left for you to expand into. Where is the room for growth at Edward Jones. Yeah, we talk about growth very in terms

of growth of impact. The impact that we want to have is driven by our purpose. Our purpose is to make a meaningful difference in the lives of more people in North America and the part of the marketplace that we serve our serious long term individual investors um and I've said a couple of times what that means is folks who value relationship, who want advice, and who have a long term orientation. Today we work with about seven

million clients. Our research shows that there are forty million investors in North America who look like serious long term individual investors. Now they are across multiple generations, across various demographics, and spread all over North America. So our addressable market is is significantly larger than the marketplace that we serve today. So we believe our opportunity remains rooted in what makes us unique, the human settered nous of what we do

and the locality of what we do. And so we intend to to continue to focus there, focus on on the relationship that we have with clients, focus on a kind of smart consistency and serving them, but also the ability to hyper personalize to them. That takes greater technology, It takes frankly, being more relevant to younger generations, because it really suits our purpose to make a meaningful difference

in more lives. If we get emerging investors started as serious long term investors, if we get them started towards their goals sooner. Frankly, they're going to live a whole lot longer than their parents or grandparents. They got to build up more investment over time in order to achieve what's most important to them. So let's talk a little bit about practice areas. I know you guys do financial

planning as well as asset management. Do you also have other practice areas like trust in the States, tax planning, insurance, anything along those lines. Yeah, you bet so. Our financial advisors are licensed, uh in a number of different areas. We are duly registered as a firm, so we are a brokerage firm as well as having investment advisory fee based platforms to help our clients and achieve their asset

management goals over time. We are also like sens in insurance, so we help our clients protect their goals um against all kinds of things that might happen. You know, the the worst thing in the world is to build a really solid plan um planning on everything going right and then having things go wrong unexpectedly. So things like long

term care needs. Um. You know, this is an area verywhere where people are becoming more attuned to the fact that they are going to need significant investment to pay for their health needs and potential long term care needs later or maybe even earlier in life as well as life insurance. And so we represent and and help our clients protect their goals as well. UM. We have we have products and services that are tax efficient, UM that help our clients manage in that kind of situation. UM.

We also help our clients with charitable planning. UM. This is something that that really aligns with folks values, with their goals, with the values that they want to pass on to the next generation, is their charitable mindedness. And so we help our clients with that as well. And then we work with with a significant number of businesses

and business owners, so helping them with their employee retirement plans. Therefore, oh one K there, simple step, I raise all the different ways that they can support their employees for their retirement planning. We do that for businesses and business owners. Quite interesting. Before I get to my favorite questions that I ask all my guests, let me throw a curveball at you dancing with the stars. What was what was that? Oh, Barry,

you've been doing too much research. I think that's on the third page of my of of the Internet search so ding from Google. Yeah, we have a local organization, a tremendous organization called the Independent Center, and they provide UM. They provide support services, full lifestyle support services for adults with mental illness UM, and they surround those people with UH with with the services they need to live lives

of meaning and well being. Well. They also have one of the most unusual fundraisers every year, and that's called Dancing with the St. Louis Stars, and so UM executives and and community leaders here in town agree to work with a professional dancer, get eight lessons and then do that dance in front of seven people. And so I did that a few years ago. I learned how to tango. And I tell you it was I have a mantra do something every day that that terrifies you just a

little bit. Well, I had my dose the day that I did that. But the point wash was not the dancing. It was it was raising support for that incredible organization. Quite amusing. All right, So let's jump to our favorite questions. We asked these of all of our guests, and and let's start with the first one. What are you watching and streaming these days? What what's keeping you busy under lockdown, either Netflix or Amazon or or any podcast you're watching,

tell us what's entertaining you during this era. Yeah, well it's a little bit different than Netflix or podcasts, but but it's art I love and appreciate, in particular contemporary art. And what I find is that as I study and watch all kinds of virtual tours of museums all over the world, which has been a real silver lining of

the lockdown. Haven't been able to go see it in person, but but digitally, I'm able to experience all kinds of different art and artists and what's inspiring to me about that is them making sense of the world during times of tumult, during times of high anxiety, and getting that out and putting it on canvas or in performance or in music. Um is is another way to think about how to serve, how to relieve anxiety, uh and and and how to make sense of the world around us.

You know, my wife teaches art, and I've been dragged to museums all around the world and one of the documentaries we stream not too long ago was on Mark Rothko. And if you're if you like contemporary art, that's I'm gonna make that recommendation because it was pretty fascinating discussion of how his art evolved into what it eventually became. Yes, thank you for that suggestion. He's one of my favorites. Yeah,

me too. And it wasn't twenty years ago. I sort of did a one eighty on Rothco and I have no explanation for why other than I hit a certain age and suddenly, oh, that's not just a splotch of color. That's a lot of really interesting things going on. Um, maybe maybe she shepherded me along. Let's talk about your mentors. Tell us about the folks who helped shape your career. Yeah, um, you know the folks who helped shape my life most fundamentally, or my parents. Um, my father who was an executive

at a publicly traded firm in Nashville. Um, who started in on the factory floor quite literally, and retired as the CEO of that organization. So the daddy daughter CEO thing is is kind of a fun story. But um. But but more importantly, the way that he thought about business, about leadership, about integrity and trustworthiness in the business world,

about relationship building shaped me. My mother was an executive with Tennessee Valley authority, and she was an executive during a time and in a place that there weren't quite there weren't quite as many women as there were men.

And so watching her operate UM and learn and UH and put up with stuff UH during that time across a very long career, was when it was inspiring and instructive to me UM in business UH as as part of my journey at Edward Jones, we have a very widely dispersed UM leadership structure in each of our regions across North America. And so my regional leaders, those who showed me the way as a new financial advisor UM talked to me about values about service UM. They were

very inspiring to me. And then then my predecessors as UM as managing partners here, I'm a student of them. Some of them I know and worked with directly. Others of I never met Mr Jones Senior and Ted Jones, the founders of our firm. I am the first managing partner who never met them, So becoming a student of their values, of their strategy, about how they thought about being differentiated in the marketplace. UM. Those have all have all taught me great lessons, very interesting let's go to

everybody's favorite question books. Tell us what you're reading now, and perhaps give us a few titles of some of your favorite books. Yeah. So I'm reading a book called um uh Agile Transformation Without Chaos. Its focuses on the way that companies are organized to create better experiences for consumers and clients, organized in an agile way to meet the marketplace more quickly, uh and in a more experimental way.

So I'm reading that. I have several art books stacked up on my table, and I'm reading a book by David Brooks. It's a new book, it's a It's a compilation of interviews that he had done over time with some of the world's leading u the spinkers, community builders leaders, uh and so just getting their their quick interviews and getting a window into those folks. I read one of those interviews tonight. Is is really inspiring as well, very interesting.

What sort of advice would you give to a recent college graduate who was interested in a career in finance? Very broadly, the advice that I give to everyone as they think about their career is ensure that what you're doing is lined up with your own personal and professional Why I say, what are you really doing when you're doing what you're doing every day? I'll say again, what are you really doing when you're doing what you're doing

every day? What is it ladder up to in terms of the mark that you want to make on the world. Not not the position that you want to have, or the role that you want to attain, or the income that you desire to have over time, That's not what I'm talking about. I'm talking about the mark that you want to leave on the world. And so whatever you're doing, if it is in financial services, um really reflect on how it ladders up to to the person that you want to be in the mark that you want to leave.

I will say very enthusiastically that the financial markets, financial services makes a meaningful and positive difference in the world, on our country. It can have a much more influential impact on society, on communities, on human beings and society. And I think that financial services is very much focused there today. And so the advice that I would give to to those recent college graduates is look at this industry as one um that has and will continue to

be very meaningful in our country and in society. That it can intersect with who you are as a person. It is not all math and numbers. That's a common misconception about the financial services industry. There's certainly parts of it that are UM, but there's a vast part of this industry UM that that is that is all about making connection with human beings and understanding what they value

in helping them achieve that. And our final question, what do you know about the world of financial services today that you wish you knew twenty five or so years

ago when you were first starting out. Well, what I probably didn't appreciate UM as I was first starting out, was how intersect the financial services industry and world is with the trajectory of history, UM, the history of our economy, the history of formation of communities and society, UM, the history of achievement by individuals, families, and businesses, and so charting the course of history being really having a front

row seat too. You know when I started in nineteen eighty five at a bank night seven and the market melt down there, UM, the technology evolution revolution in the nineteen nineties, UM, the great recession that we had talked about earlier, uh, and currently what we're facing in our economy I'm a student of history, and so just having a front row seat to how the how the economy, financial industry, and society intersect has and fascinating and I and I guess when I'm in my armchair after all

of this is over and look back on it, um, I'll really be able to see something about the arc of history UM from a from a ground level view. Thanks Penny for being so generous with your time. We have been speaking with Penny Pennington, managing partner at Investment Giant ed Jones. If you enjoy this conversation, well, be sure and check out all of the hundreds of previous such conversations we've had. You can find them at iTunes

and pretty much wherever you usually find your podcasts. We love your comments, feedback and suggestions right to us at m IB podcast at Bloomberg dot net. Give us a review at Apple iTunes. You can check out my weekly column on Bloomberg dot com slash Opinion. Sign up for our daily reads at Hults dot com. Follow me on Twitter at rid Halts. I would be remiss if I did not thank the crack staff that helps put these conversations together each week. Nick Falco is my audio engineer.

Michael Boyle is my producer. Slash booker A Tico. Valbrunn is our project manager. Michael Batnick is our head of research. I'm Barry Results. You've been listening to Masters in Business on Bloomberg Radio