Top 4 Edward Jones Financial Advisor Interview Questions

In terms of assets under management, Edward Jones stands near the top of the wealth management rankings (in second place, between UBS and Credit Suisse). 

However, as you likely already know, places like Edward Jones and Charles Schwab operate quite differently to the wealth management practices tied to large investment banks (i.e., UBS, Goldman Sachs, Credit Suisse, JPM, etc.).

For Edward Jones, the focus has always been on serving clients across the wealth spectrum, not just those within the top few percent as has historically been the want of the wealth management and private banking practices of the larger investment banks.

So, this partly explains why there are so many more financial advisors at a firm like Edward Jones relative to the number of wealth managers at, for example, Credit Suisse. While the firms may have similar sized assets under management, Edward Jones will have many times more clients and, as a result, needs to have more financial advisors to be able to handle all of those clients.

With that said, as we’ve discussed in many posts before, the wealth management practices of large investment banks have been moving downstream for years: looking at bringing in clients with a smaller level of assets than ever before.

In decades past, one could reasonably say that firms like Edward Jones and Charles Schwab serve those in the upper-middle class, while firms like Goldman Sachs and J.P. Morgan serve those with true levels of wealth, but that’s an entirely unfair characterized these days. The reality is there are many financial advisors within Edward Jones handling hundreds of millions worth of client assets and they are routinely dealing with clients who could gain access to any other wealth management practice if they wanted to move elsewhere.

But there is still one large residual difference, when it comes to how a firm like Edward Jones operates relative to a firm like Credit Suisse: the interview process. For Edward Jones and Charles Schwab, they’re much more receptive to bringing in new financial advisors, providing some training, and then letting them get started.

Whereas, with a firm like Credit Suisse – or the wealth management division of any other large investment bank – the training period will be more intensive, and it may not be the case that you’re allowed to solicit clients right away (i.e., you may need to help others before striking out on your own).

Because Edward Jones has more of a “sink or swim” approach to new hires, the interview process tends to be less onerous, and the interview questions a bit easier. I’m personally less familiar with Edward Jones than I am with Goldman, JPM, etc. but I figured I’d put together some interview style questions here for you – because if you can nail a GS, JPM, etc. interview than you’ll have no troubles at Edward Jones.

Edward Jones Financial Advisor Interview Questions

Below are some of the interview questions you could get at Edward Jones. I’ve tried to pick some of that are a bit more difficult, but that still could reasonably come up through the interview process.

1. If you could only invest in just one asset class over the next year, what would it be?
2. If a client wanted to be overweight cash due to economic uncertainty, what would you advise them?
3. If a client calls you and is worried about the markets, how would you approach that conversation?
4. If the Fed were to begin cutting interest rates, what are two ways in which that could benefit equities?

If you could only invest in just one asset class over the next year, what would it be?

This is indicative of the kind of more open-ended interview question you could be asked. There’s no right or wrong answer here. Rather, you’ll be judged on how you explain your answer.

So, for example, you could say that you think treasuries would provide the best risk-adjusted return over the next year. The reason being that you think we’re in an increasingly precarious economic situation, and that there is more potential downside risk to equities if we have meaningful earnings deterioration next year (here's a good Bloomberg article regarding Morgan Stanley's thoughts on this).

However, on the flip side, you see inflation abating and the Fed quickly running up against its terminal rate (i.e., the rate at which the Fed will stop hiking). As a result, you think yields across the treasury curve are largely as high as they will be and that there’s thus limited downside risk (remember that as the yields of bonds go up, the prices go down).

So, you think that as inflation abates and growth further slows, yields will come down across the yield curve as the market prepares for the Fed to begin cutting rates to support economic growth further.

You could also add that an additional benefit of treasuries is that they have (by definition) no credit risk and do provide a relatively modest amount of interest income for the holder. So, in a tumultuous and uncertain economic time, it could be that these ultra-safe assets actually provide the best return (especially on a risk-adjusted basis).

If a client wanted to be overweight cash due to economic uncertainty, what would you advise them?

It’s common during economically uncertain times for clients to get spooked by market conditions (especially with falling equity prices) and want to rotate into cash.

During an environment in which inflation is running less than two percent, that’s not always the worst decision in the world. However, in today’s environment, what you would want to explain to your client is that they need to be thinking in terms of their real (not nominal) wealth. In other words, they need to be thinking about their wealth after adjusting for inflation.

So, if inflation is running at 4% next year, then being all in cash is effectively the same as earning a -4% return. Now, that’s better than putting all their money into equities if they fall by significantly more, but there are many cash-like options due to our current high-rates environment that could provide a level of return that either matches inflation or lessens the impact from inflation.

For example, a client could put their money into short-dated treasuries (i.e., the two-year treasury) and earn around 4% over the next year. Alternatively, they could allocate into TIPS (treasury inflation protected securities) that have a coupon rate indexed to CPI to insulate themselves fully from the impact of inflation.

Both of these options have the benefit of being short-duration (i.e., you aren’t locking your money up for months or years) while at the same time providing some modest level of return on a client’s money that hopefully at least keeps their return profile flat.

If a client calls you and is worried about the markets, how would you approach that conversation?

As a wealth manager or financial advisor, one of your most important responsibilities will be talking to clients when they’re worried or upset. For many just starting in their career, this can be one of the most challenging aspects of the job, but embracing it is absolutely essential to long-term success.

What you always want to do in these scenarios is listen attentively, make sure you fully understand why your client is concerned, and then come up with an action plan to address those concerns. This could involve changing the risk-profile of their portfolio, setting them up with meetings with experts in certain areas (i.e., mortgage lenders), etc.

It’s imperative to always remain empathetic. Your client has entrusted you with a great responsibility, and your job is always to show an appreciation of that reality. However, it’s not good enough merely to commiserate with your client: you need to develop an action plan and present your client with some options to try to remedy their concerns.

If the Fed were to begin cutting interest rates, what are two ways in which that could benefit equities?

Needless to say, the impact of rates on equities is multi-variable. However, there’s no doubt that a rising rates environment – as we saw through 2022 – has a generally negative impact on equities.

The largest reason being that the value of any equity (i.e., Apple, Microsoft, Exxon, etc.) can be thought of as the summation of all future cash flows discounted back to their present value (so, near-term cash flows are more valuable than cash flows many years into the future).

The actual rate you discount cash flows by is the weighted average cost of capital (WACC), which can be thought of as the summation of the cost of debt and the cost of equity -- and rising or falling rates impact both cost of debt and cost of equity.

For example, all corporate debt will be priced at some spread to the underlying risk-free rate. So, when rates go down, the cost that a company needs to pay (all else being equal) to issue debt will fall. This is why we saw so many companies being able to raise debt as such low levels through 2021, as the Fed Funds rate was held at effectively the zero-lower-bound.

So, as rates begin to fall from their currently elevated level, the cost of debt for a company will eventually fall as they’re able to issue new cheaper debt (or, if they have floating rate debt, that will become cheaper right away).

Further, rising or falling rates have an immediate impact on the cost of equity that is included within the WACC formula. This is because the cost of equity has the risk-free-rate (i.e., often the ten-year treasury) as a cornerstone of the formula.

So, when the Fed begins to cut rates, that usually leads to the entire yield curve falling down, which reduces the risk-free-rate being used as part of the cost of equity component of WACC.

The obvious extension of this is that when the cost of debt and/or the cost of equity declines, that causes WACC itself to decline. And since you’re dividing future free cash flows by WACC, when WACC declines that makes the present-value of future free cash flows higher, thus making the company worth more today than it was during a higher rates environment.

Obviously, there’s not a purely mechanical relationship between rates and equities. When the Fed cuts rates by 50bps that doesn’t directly translate into equites going up by a certain amount. However, there’s no disputing the fact that falling rates do help support equities – it just so happens that rates are cut most during recessionary periods, so there are other factors that may be suppressing equity prices and valuations (i.e., falling earnings).

Conclusion

Hopefully these questions have helped you get a feel for what to expect. As I mentioned at the outset of this post, there’s a relatively large gap between the rigour of a financial advisory interview at Edward Jones with a private wealth management interview at other firms (like Goldman or Morgan Stanley, for example).

But, you always want to be as prepared as possible, and these questions and answers will give you a feel for the level of depth that should impress your interviewer. With that said, you want to focus significantly on classic behavioral questions as well, as they’re going to be more likely to arise at Edward Jones (i.e., walk me through your resume, why are you interested in wealth management, how have you demonstrated leadership before, etc.).

If you’re looking for more questions, be sure to check out the long list of wealth management interview questions I put together. I’ve also put together a list of financial advisor interview questions as well, along with questions and answers for the wealth management practices of the larger investment banks (which is what I’m most familiar with). There’s also the little book I created that contains 180+ wealth management interview questions and answers that would almost assuredly make you over-prepared.