JAMESBURG, N.J. - When 78-year-old Tom Farino wants to see his broker, he heads straight to his local bank branch - and strolls right past it.
Mr. Farino, a retired farmer and businessman in this town of 25,000 not far from Princeton, takes his investment dollars to an Edward D. Jones & Co. broker, whose office is tucked in a hallway just five or six steps beyond the bank entrance.
Haunting banks like a shadow is a hallmark of Jones & Co.'s strategy. The firm has become one of the nation's leading brokerages by setting up shop across the street from banks and picking off affluent customers who want more than passbooks and checking accounts.
As banks plunge into the brokerage business, they are acutely aware of competition from regional and national brokerage firms, which possess the investment sales savvy that bankers are just beginning to gain.
And no brokerage looms larger in bankers' minds than Jones & Co.
As Roger Thomas, a former Jones & Co. broker who now advises banks on marketing strategies, puts it: Any banker who doesn't see Edward D. Jones as a competitive threat is "just whistling past the graveyard."
Jones & Co.'s guiding force is John Bachmann, its managing principal since 1980.
When he took the job, the St. Louis-based firm had 220 offices, mostly in small towns. Today, Jones & Co.'s network of 3,380 offices stretches from coast to coast and reaches into Canada and the United Kingdom.
What's more, Mr. Bachmann expects to triple the brokerage's branches to 10,000 over the next seven years. Much of that growth will come in cities and suburbs, which have been the focus of Jones & Co.'s expansion.
"Our appeal is not geographic. It's based on a customer type," Mr. Bachmann said. "We attract conservative investors, and that you can find almost anywhere."
Most of the firm's offices are modest, and tailored to local tastes. Hanging alongside a poster advertising trust services could be a photograph of the company-sponsored Little League team. There's a measure of comfort but also an old-fashioned barbershop quality that encourages people to sit a spell, and talk.
"People come in all the time and talk about almost anything they want," said Paul J. Hansell, the Jones & Co. broker in Jamesburg. "They like popping in and out."
Mr. Farino, who does his investing with Mr. Hansell, is in many ways typical. He traces his risk-averse ways to his Depression-era boyhood in New York's Coney Island, where he used to pitch pennies with his friends. "I tell you, I lost some money that way," he said.
Like many of Mr. Hansell's clients, Mr. Farino dropped by to see his broker before a visit to the bank.
And why isn't he investing at the bank, which has banners advertising its mutual funds draped over the entrance?
"They're not competent," Mr. Farino snaps. The way he sees it, banks just give their investment representatives "a few books and they think they know the works."
"This guy," Mr. Farino says, pointing to Mr. Hansell, "he's been through it all."
Peter M. Crowley, the senior vice president in charge of retail investments for Midlantic Corp., the bank where Mr. Farino has checking and savings accounts, was dismayed by this vignette. But he said it isn't altogether surprising.
Banks, he said, are taking pains to hire top-notch investment representatives, and they are serious about brokerage services. But they're definitely playing a game of catch-up.
"The market is changing so quickly and so rapidly, and we're always trying to get ahead of the curve," Mr. Crowley said. "It's a challenge that banks face, and if we are not achieving that for certain customers, then we have to do a better job."
Others attest that the perception that banks lack investment expertise is one of their toughest obstacles in landing brokerage clients.
Listen to John S. McCune, the chief executive of Norwest Corp.'s investment services unit.
When his mother died, the family lawyer in Grand Island, Neb., was prepared to turn over the job of liquidating some stocks to a Jones & Co. broker - until Mr. McCune pointed out that he was in the same business.
"It hit me then that here is an influence maker. At the drop of a hat, he thought of Jones," Mr. McCune said.
Banks, he added, "have a long way to go before we reach that kind of influence."
One reason Jones & Co. exerts such a hold is that it has cultivated the personal touch with clients.
The firm relies on small one-person shops run by brokers whose responsibility it is to get out into the community and meet, face to face, at least 1,000 people before they make even one investment sale.
Jones brokers typically leave the office in the morning with 20 to 30 business cards in their shirt pockets, and don't come home until they've given them all out.
The tactic puts them in contact with many bank customers whose money is tied up in certificates of deposit, whose earnings have been shrinking, or whose pension income could stand a little boost. All are potential customers for a Jones & Co. broker.
Mr. Bachmann says that the St. Louis firm doesn't have an official policy of stealing customers away from banks. But the company is methodical in its approach to opening new offices and attracting customers.
Before setting up a brokerage office, Jones & Co. employs a research company to map out pockets of wealth in each new community and assess the viability of each market. If the community can support an office, Jones & Co. will then scout out a location.
The most likely spots for an office are areas with heavy pedestrian traffic near well-known buildings, such as the library, city hall, or a prominent local bank, one broker said.
Mr. Bachmann, who started with Jones & Co. in 1959, says that while the firm's sales strategy remains much the same as it was when he started, the company has kept a close eye on its competitors and has continued to adapt.
The company is achieving part of that goal with the purchase of Boone National Savings and Loan Association, Columbia, Mo.
The $64 million-asset thrift, Mr. Bachmann said, will allow the company to have a single source for its trust services, instead of the patchwork of banks it works with right now. Jones & Co. may also issue credit cards through the thrift, he said.
Jones & Co. expects to receive the go-ahead from federal banking regulators in July, and that could make bank competitors even more anxious.
"We've been expecting banks to get into this business for 20 years now, and have been preparing ourselves to compete in that environment," Mr. Bachmann said.
