In a new interview with Yahoo Finance’s Adam Shapiro, Edward Jones Managing Partner Penny Pennington breaks down her career path at the company, top concerns for her clients, balancing 401(k) during retirement, and much more.

Video Transcript

ADAM SHAPIRO: Penny Pennington is CEO and managing partner at Edward Jones. She's responsible for the firm's strategic direction, working together with nearly 50,000 associates across North America. Pennington is just the sixth managing partner in Edward Jones' 99-year history.

Penny, it's good to have you here at Yahoo Finance's All Markets Summit. Thank you for joining us.

PENNY PENNINGTON: Adam, it's a pleasure to be with you and your audience.

ADAM SHAPIRO: So we're talking about the path forward. But before we do that, some of our viewers may not be aware that you started your career-- and I love doing this because I worked in Michigan-- you were in Detroit or in Livonia, and I used to work over in Berrien Springs on the other side of the mitten. But in 2000 when you became a financial planner, what do you take from what you learned in those years to now being the first female managing partner at Edward Jones?

PENNY PENNINGTON: Well, Adam, I'll very briefly let you and our audience know why I came to Edward Jones as a financial advisor. I'm a CFA. My background is in corporate finance. I've been in corporate banking for many years before coming to Edward Jones. I saw, at Edward Jones, a business model that was built around building trust in a community. In a branch that I was the financial advisor leader of, it was all about building trust with individual families.

The second thing that I saw was an investment philosophy that is true. It's an investment philosophy that has built durable, sustainable wealth for families in our country for decades. And that is the investment philosophy that's built around quality, a long-term orientation, and good diversification. And so as a financial advisor with Edward Jones for six years in my branch in Livonia, that's what I did. I built trust in the neighborhood and our community. I was part of our community.

I was a Rotarian, a community builder building organizations in Livonia. And my job was to help relieve anxiety during-- think about that time from 2000 to 2006-- relieve anxiety on the part of families who were building their financial futures to achieve what was most important to them. What I take from that, then, that experience, to the role that I have today, is simply recognizing that we serve 7 million of those families today and have an addressable market of 41 million families in North America who value advice, who are looking for a relationship with a high-quality financial advisor, and have a long-term orientation. So really, that thread over the last 21 years of my career at Edward Jones has pulled all the way through.

ADAM SHAPIRO: Do the majority of your clients come to Edward Jones for retirement planning or for totality-- for instance, planning-- I've got a child who's going to be going to college in 12 years. Who are the majority of the clients, and how do they approach this?

PENNY PENNINGTON: Yeah. Well, so often, we get pretty wrapped up in thinking about retirement. And Adam, we should, right? It's in the data. Many of us are going to live in retirement for decades, for many, many years. And when you add on that the necessity to pay for health care, to pay for long-term care, knowing that we want our health spans and our lifespans to marry up rather than to diverge, what that means is that the planning for retirement takes many years pre-retirement in order to do that well.

And so our clients come to us as multidimensional human beings who've got a lot on their minds about what they're trying to accomplish. And that does change and ebb and flow over time. We might talk about this in a moment, but it certainly has changed as a result of the pandemic. So for example, younger investors are coming to us now saying, you know, I get it. I need to save for an emergency, and I need to save for the unexpected. Those two goals associated with the conversations that we're having with our clients are the two that have gone up most significantly.

Retirement, the planning for retirement has also shifted. 70 million Americans say that the pandemic has impacted their planning for retirement. A third of those say that they are going to be working longer, but another third say they're going to be working a shorter amount of time. And so a financial advisor listening to all of those impacts is what we're up against right now.

ADAM SHAPIRO: One of the pieces of data that I pulled for the discussion with you comes from the Center for Retirement Research at Boston College. And they talk about the different income quintiles in the United States. And when we talk about that retirement number, the first three quintiles have a median balance in their 401(k) of just barely $100,000. And if you look at the first two, it's set barely $75,000.

So when someone is looking at retirement, 401(k) was never intended to be the sole source of income. Social security, in a worst-case scenario after 2035, may pay $0.70 on the dollar if Congress doesn't do anything. Are these the kinds of things that you talk about with clients as they prepare for that day when they have to generate the income for themselves?

PENNY PENNINGTON: Absolutely. And you mentioned a couple of things I'll just amplify. Social Security was never intended to be the sole source of income. Historically, folks have looked at it as a three-legged stool-- what they saved in their 401(k) or IRAs, Social Security, and investments outside of those two buckets of money. And so how do we optimize those income streams in order to afford the type of lifestyle that's really one of greater well-being around your health, your family, your purpose, the legacy that you want to leave, and then the set of financial resources that's going to enable you to do all of that?

ADAM SHAPIRO: When we look at this kind of planning, one thing that we don't tend to focus on is saving too much. And in preparation for this discussion with you, you actually have clients who are saving too much. Explain this to us.

PENNY PENNINGTON: Well, one of the things that we know is that critical impacts on a savers or investor's life, especially during their formative years when they were beginning their investing life, play out for them for the rest of their lives. And so for some who are in retirement today, things that happened in their lives, especially in the financial markets years ago, taught them to be very, very careful. And so as a financial advisor, I often had a harder time convincing people that they really could spend the money that they had saved for all those years in taking their families on vacations or in making philanthropic gifts and donations. That's another part of what a good financial advisor does.

I think this is one of the fundamental things that also happened during the pandemic, is people have gotten in touch with what's really important in their lives and the legacies that they want to leave to their children, to community organizations, the things that they're passionate about in order to leave the world better than they found them. And that's why we were so interested to learn, in the Age Wave study, that purpose is fundamentally a part of what people want to plan for and talk about before they're in retirement and after they retire.

ADAM SHAPIRO: We're living through an era when, once again, retail investors are quite the discussion. And there are people who will always think they can do it better than, say, a professional. When you're dealing with clients, do you internally measure performance of the financial planners versus, say, index funds? Because Warren Buffett-- there are lots of people who constantly are telling those of us who are not financial planners, look, you're not going to beat the S&P 500, so do an index fund and call it a day.

PENNY PENNINGTON: Well, there are a lot of different financial tools to utilize. But fundamentally, the benchmark that any client ought to be using for their performance is the performance they need to get relative to their time horizon, their tolerance for risk, and what they're trying to accomplish. Beating the S&P 500 is not the benchmark that every person should be looking for in terms of the life that they want to live in retirement or before. And those are the benchmarks that really, we should test our performance against and test our results against. What really matters is what you are trying to achieve in your life for the goals that you're seeking to accomplish.

ADAM SHAPIRO: And as I wrap up, there's one last thing-- because you do administer 401(k)s for small businesses. Other firms that are doing this are now introducing within their 401(k) offerings ability to create annuities for the day when you do need to kick off a certain amount of income every month when you retire. Is that something that your firm is looking at offering within a 401(k), or is that the kind of thing you walk someone through when they're at the end of the saving years to annuitize a portion of their retirement investments?

PENNY PENNINGTON: Again, there's so many different tools to accomplish the goals that our clients are looking for. When you talk about an annuity and the lifetime income potential of an annuity, that's confidence-building for clients to know that they are not going to outlive that monthly throw-off of income coming from an annuity.

Many years ago, you'd look at an annuity, and you'd say, well, what I'm paying for in an annuity is the tax efficiency of the annuity. And I already get tax efficiency inside of a 401(k) or an IRA. That's true. However, one of the benefits of the annuity is that lifetime income potential. And so it does afford us an opportunity to build that portion of our income stream in a really systematic and intentional way. So yes, there is a place for those kinds of annuities, even inside a 401(k) or an IRA. Thoughtfully managed, there is a place for those.

ADAM SHAPIRO: And my last question-- because you've already accomplished so much, and we've talked about your professional career, but what some of the people watching and some of your clients, your 7 million clients, may not know is that at the same time your mother was battling cancer, you were battling cancer, and you both beat cancer. What does that teach you as we look at the path forward, especially as Americans are now not perhaps going through life-challenging battles, but the pandemic, as you said at the beginning of this, has changed how we look at things? What lessons do you take from your personal battle that you're sharing with your clients?

PENNY PENNINGTON: Thank you. It's a poignant question. I call myself a thriver rather than a mere survivor. Somebody said to me years ago, surviving is a low bar. Let's do what we can to thrive. And my mother and I did that. We did that together. But we also did it with the help and the support of our families, our doctors, our faith, my family at Edward Jones. And so I think fundamentally, what I learned there and what has been amplified in the last 18 months is that we are in this together. We buoy one another.

We help each other along-- the village of people that surrounds our clients, that surrounds you and your family, Adam, that surrounds your audience, that buoy of advisors, of family, of folks who know that they are in it together. We've said the last 18 months here at Edward Jones, we were built for times like this. This is what we do. We help relieve anxiety in people's lives. And that was done for me, and I seek to do that for others every day.

ADAM SHAPIRO: And next year, you're going to celebrate 100 years Edward Jones has been part of this story. So we wish you all the best. Penny Pennington, thank you for joining us.

PENNY PENNINGTON: Thank you.