Edward Jones's $5,000 digital pilot takes aim at the next generation

Edward Jones is testing a digital product for the next generation, starting with a small group of its own advisors. The pilot, Edward Jones Digital Managed Solutions, has a $5,000 minimum. It charges 0.65% a year. The firm plans to widen it next year, to more advisors and directly to consumers. AdvisorHub reported the news Tuesday.

The service keeps a human in the loop, but a different kind of human. Remote advisors are paid a salary and can earn merit-based discretionary bonuses rather than commissions. The underlying portfolios are firm models, according to a brochure cited by AdvisorHub. They hold mutual funds, exchange-traded funds and unaffiliated money market funds, with allocations running from all-equity to income-focused. The fit comes from the client's risk tolerance, time horizon and stated purpose for the money.

On price, Edward Jones sits between the two tiers Bank of America helped establish. Merrill Edge Guided Investing charges 0.45% as a base. The fee runs to 0.85% when a client adds an advisor. Its minimum is $1,000. Edward Jones asks for a larger minimum and charges something in between. That difference likely buys what makes the pilot distinct: a human being who answers the phone without a commission tie.

The account size is the point. A $5,000 relationship cannot cover the cost of a licensed advisor in a branch, and the pilot does not try to sell that fiction. It keeps the account inside the firm, with a real portfolio and a person assigned to it, so the client can move up when the balance moves up. Independent practices wrestle with the same challenge when a young client walks in the door.

Edward Jones frames the pilot with a finding from its own research: just 5% of Gen Z describe themselves as financially fulfilled. Among millennials, the share is 10%. Those numbers are the hook. Whether a generation that feels unfulfilled will take advice from a branch office or from a phone matters more than the percentages. The pilot's answer is that the phone comes first.

The move extends a multi-year modernization campaign at the St. Louis firm. Edward Jones has thinned its home office, added capabilities for planning and ultra-wealthy clients, and this year won approval to open its own bank. The bank gives the digital product a natural deposit destination down the road, though the timing of that link is unconfirmed.

The firm says younger investors have a strong interest in digital advice. The pilot is a hedge against disintermediation. A generation that does not default to an advisor in a suburban office can be met with a service that looks familiar. The $5,000 minimum appears to be the dividing line: real enough to count, small enough that the firm can afford to serve the account.

The firm also brings distribution that no new entrant can match. It has about 20,500 brokers. Total client assets stand at $2.6 trillion. Those brokers sit in the strip-mall offices that built the firm, and they now have a product to hand a younger client instead of watching that client go to an app. Whether the brokers are compensated for the referral is not in the coverage. Either way, the product gives them an answer for the next generation.

Compensation for the digital service is the quiet detail. A remote advisor on salary, with merit-based discretionary bonuses, departs from the branch model that built the firm. The fee is 0.65%. At the minimum, the account produces $32.50 a year. No traditional face-to-face relationship is built on $32.50.

If these accounts grow and move into the branch network, the pilot is a way in. If they stay digital, it is a parallel service, serving the firm's next generation without a broker in the middle. The test comes when a $5,000 account becomes a $50,000 one.