The world needs more financial advisors.
Hasan Malik, Edward Jones’s Chief Strategy Officer, doesn't mean this as a philosophical statement, but a literal one.
"If you ask industry experts, financial advisors will fall in numbers over the next decade," he told Fortune. "You already have a gap—the country needs 50,000 new [advisors]—and numbers are falling, so that advice gap is expanding."
The advice gap—a reference to the growing gulf between people who could benefit from financial advice and those who actually receive it—is one of many slow but seismic changes that means we’re in a pivotal time for wealth management. Edward Jones, a Fortune 500 company, is looking to address a changing industry in part by investing.
Earlier this year, Edward Jones launched an in-house venture capital arm, Edward Jones Ventures. Some of its portfolio companies so far include life insurance fintech Porch Software, long-term care planning AI company Waterlily, estate advisory platform Vanilla, and family financial education platform Goalsetter.
Edward Jones Ventures is structured as a private partnership in which approximately 33,000 of Edward Jones’s 54,000 associates are limited partners—and several hundred are general partners who own the firm. General partners bear the risk, and returns accrue to the firm as a whole.
Despite its size—Edward Jones has more than 20,000 financial advisors across North America, and has $2.2 trillion in assets under management—the company’s venture arm is interested in investing in early stage companies.
"A lot of times VC firms or CVCs will say: ‘Hey, we want to invest in this investment thesis or help solve this need. Let’s look at the ten startups in front of us and we’ll try to pick the winner,’" said Malik. "We'll say: ‘Hey, we have an entrepreneur that shares our values and our commitment to our clients and our financial advisors.’ Then, we’ll take what they've developed and mold it into something truly scalable. It's an iterative exercise. They bring us something and we and our advisors help them mold into something that’s actually a gap in the market, increasing their chances of success."
"We don't expect you to have found product-market fit," Malik added. "We will find you or help you find the product-market fit. We prefer to be design partners for these startups and founders."
Malik hopes startup innovation will help wealth management adapt to rapid changes. The way he sees it, wealth management is undergoing multiple tectonic shifts. There’s the product side, where the pace of product and technology development is accelerating—at the same time, high-tech tools will help support and attract financial advisors at a time when they’re needed more than ever. Then there’s the growing advice gap, which ties into another reality that financial advice needs are becoming more complex.
"You know, 103 years ago, when Edward Jones was started by those forward thinkers, you could put all the tax regulations on one piece of paper, maybe a two-sided piece of paper," said Malik. "Today, IRS code is tens of thousands of pages and, if you include all the notifications, it's upwards of 50,000 pages…complexity is increasing, and that means you need more tools."
See you tomorrow,
Allie Garfinkle
X: @agarfinks
Email: alexandra.garfinkle@fortune.com
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