Edward Jones IRA and Roth IRA Review

An individual retirement account (IRA) is a retirement savings vehicle that provides a tax deduction and tax deferral benefits for investors. A Roth IRA does not provide an immediate tax deduction, but all gains are tax-free. Edward Jones is a full-service brokerage firm that offers both IRAs and Roth IRAs to the public.

Edward Jones was created in 1922 and is based out of St. Louis, Mo. Edward Jones serves more than 7 million investors from more offices than any other investment firm in America. The firm is considered a full-service brokerage firm, with more than 13,000 financial advisors.

Investors who want to open an IRA or Roth IRA at Edward Jones need to find a local financial advisor. To prepare for the first appointment, investors should think about why they are investing, gather statements and bring questions to ask. Edward Jones financial advisors will assess the investor's needs and create a tailored investment plan.

The financial advisor will help determine whether a traditional or Roth IRA is better. Investors can contribute up to $5,500 to a traditional or Roth IRA and an additional $1,000 catch-up contribution for investors ages 50 or older. Depending on the tax filing status, traditional IRA contributions can be deductible. For example, single tax filers that are covered by a work retirement plan can deduct full contributions if their adjusted gross income (AGI) is less than $63,000.

Roth IRA contributions are not deductible, but all gains are tax-free when withdrawn. Not every investor is able to contribute to a Roth IRA, and an Edward Jones advisor can help determine eligibility. A single tax filer can contribute the full amount if his AGI is less than $135,000.

Edward Jones IRAs and Roth IRAs can be established on a commission or managed account basis. Since Edward Jones is a full-service brokerage firm, its financial advisors can utilize many different investment options. Stocks, bonds, exchange-traded funds (ETFs), mutual funds and unit investment trusts (UITs) are all available to clients. Financial advisors can help establish which investments are suitable for retirement accounts based on the client’s investment objective and risk tolerance.

The Advisory Solutions investment program is the Edward Jones managed account available to clients. These accounts charge an annual advisory fee instead of commissions. The Advisory Solutions have several asset allocation models that contain a broad range of vetted mutual funds and ETFs.

The Bridge Builder mutual fund lineup is made exclusively for the Edward Jones Advisory Solutions program. Eight different funds are available, with funds that specialize in domestic stock, international stock, and fixed income. The Bridge Builder Core Bond Fund (“BBTBX”) is a core bond fund that was launched on Oct. 28, 2013. The fund has a gross expense ratio of 0.36% and as of Dec. 31, 2018, had an annual one-year average return of 0.11%. This is higher than the benchmark Barclays Capital U.S. Aggregate Bond Index return of 0.01% for the same time.

Traditional and Roth IRAs at Edward Jones have a $40 annual account fee. However, clients with total assets above $250,000 are exempt from annual account fees. Commission in the IRAs can vary, depending on the securities purchased. Stocks and ETF trades create a commission of about 2%. Mutual fund commissions are dependent upon the share class. A-share mutual funds have a large upfront fee and C-share funds have a level fee structure. The Advisory Solutions program requires a $25,000 account minimum and charges an annual program fee ranging from 1% to 1.5%.

Edward Jones is very comparable to other full-service brokerage firms, like Merrill Lynch or Morgan Stanley (NYSE: MS). The real comparison would be the relationship developed by the financial advisor and the client. Commissions and the advisory investment programs are also very similar to other full-service brokerages. However, the annual IRA account fee at Edward Jones is lower. For example, Morgan Stanley charges $75 per account, but it is waived for clients with at least $1 million in total assets with the firm.

Overall, Edward Jones is a viable option for investors looking to open a traditional or Roth IRA. The most important factor is the quality of the financial advisor and the relationship he has with the client. In fact, Investorjunkie.com rates Edward Jones as an average full-service brokerage and does recommend it for investors with less than $10 million in assets, due to the high fees.