The banking industry is turning the tables on Edward D. Jones & Co.

In the 3,000 towns where it operates, the St. Louis-based brokerage firm has been the nemesis of small banks, reveling in its ability to turn affluent bank customers into investors.

But as regional banks dramatically expand their brokerage businesses, Jones & Co. is getting a taste of its own medicine. A top executive says First Union Corp., Charlotte, N.C., is shaping up to be a particularly fierce rival.

"It took Edward D. Jones 120 years to get 2,800 brokers and they want to do it in one year. I call that competition," said Thomas Miltenberger, principal in charge of mutual fund sales for the brokerage.

Indeed, Mr. Miltenberger dismisses the idea that Jones & Co.'s top challenge is to fend off the community banks that are piling into mutual funds and annuity sales.

"We consider other banks our competition - the NationsBanks and First Unions of the world," Mr. Miltenberger said. "We think you have to be big to be significant."

To stay a step ahead, the firm has been hiring 100 people a month. And it is making a special effort to recruit bankers to its roster.

The company sees rich pickings among bankers who have been set adrift by the continuing consolidation within the banking industry. Ex-bankers, especially those with brokerage experience, are particularly valuable because of their familiarity with people's money management needs, Mr. Miltenberger said.

While Jones & Co. looks for way to stay competitive with the regional banks, it also continues to raid small towns for new customers, terrorizing community banks with volleys of advertising.

In Jerseyville, Ill., Jones & Co. flooded the town with radio and print ads showcasing investment products with higher interest rates than competing bank certificates of deposit, according to Finis Schultz, president of the $70 million-asset Jersey State Bank.

As a consequence he said, the bank, which does not sell mutual funds or other uninsured investments, has seen its customers lining up at the firm's door.

A 'Cyclical Business'

"We have a better position of trust and confidence in the community but that isn't worth anything" Mr. Schultz complained.

Though Jones & Co. has generally been successful in luring investors, the doWnturn in the stock and bond markets is taking its toll, Mr. Miltenberger said.

"Our business has certainly died down because of uncertainty over the markets," he said. "But it doesn't surprise us - it's a cyclical business."

The company is also intent on expanding its horizons beyond small-town America. Jones & Co. recently opened four offices in Canada with a headquarters in Toronto. The next step, he said, is the United Kingdom.

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