October 22, 2010

J.D. Power's Best Firms for Financial Advisors

Ability to spend more time with clients boosts advisor satisfaction--and retention--in 2010

Financial advisor sentiment regarding their firms has stabilized in 2010 following a steep drop from 2007 to 2008, according to the J.D. Power and Associates 2010 U.S. Financial Advisor Satisfaction Study released Friday.

The study measures the satisfaction of both advisors employed by investment services firms and independent advisors, who are affiliated with a broker-dealer but operate independently. It examines eight key drivers of employee advisor satisfaction: firm performance, compensation, work environment, products/offerings, technology, job duties, contact and people.

The study also examines the key drivers of satisfaction among independent advisors: firm performance, people, technology, compensation, contact; job duties, products for clients and offerings for advisor.

The J.D. Power study finds that advisor perceptions of their firm’s financial stability have improved, most notably among independent advisors and employees of wirehouse firms (including Merrill Lynch, Morgan Stanley Smith Barney, UBS Financial Services and Wells Fargo Advisors). Perceptions of financial stability of wirehouses have improved to 5.4 (on a 7-point scale) in 2010 from 4.6 in 2008. Though advisors’ perceptions of the financial stability of independent firms have improved to 6.3 in 2010 from 6.0 in 2008, they still trail those of advisors of non-wirehouse firms (6.5 in 2010).

The top three firms for overall satisfaction among employee advisors:

  • Edward Jones ranks highest with a score of 876 on a 1,000-point scale, and performs particularly well in the work environment and job duties factors.
  • Raymond James and Associates follows with a score of 857, and performs particularly well in compensation and perceptions of firm performance.
  • Merrill Lynch ranks third in the segment with 710 points, and performs well in the technology and products/offerings provided to its advisors.

The top three firms for overall satisfaction among independent broker-dealer advisors:

Commonwealth Financial Network, which is led by Chairman Joe Deitch (left), with a score of 898. It performs particularly well in perceptions of financial stability and operational and compliance support.

Cambridge Investment Research, led by Chairman Eric Schwartz (left, a 2010 Investment Advisor Broker/Dealer of the Year), follows with 848 points. It performs particularly well in products for clients and job duties as it relates to flexibility in choosing products and services to recommend.

Raymond James Financial Services. led by Chairman Tom James (left)ranks third with a score of 845, and performs well in firm performance, products for clients and the usefulness of the firm’s investment research.

 

“As the financial troubles, compliance violations and merger and acquisition activity of some of the largest wealth management institutions begin to fade from memory, sentiment among financial advisors appears to be settling back in place,” David Lo, director of investment services at J.D. Power and Associates, said in a statement. “Perceptions of financial stability hit a low point in 2008, but now appear to be improving. This is particularly important because brand image is such an important element that drives advisors’ perceptions of their firms overall.”

The study also finds that a majority of the best practices that drive advisor satisfaction center on maximizing the time advisors can spend with their clients and minimizing the time spent on administrative activities. For example, among employee advisors, best practices include providing dedicated compliance support, software programs that are aligned with daily workflow processes and same-day contact from IT support. Likewise, for independent advisors, best practices include adjusting the workload so that only 15% or less of a typical week is spent on compliance-related tasks such as paperwork, and providing completely integrated software programs.

“Fundamentally, the firms that maximize the amount of time advisors spend with clients and minimize the time they spend on administrative tasks benefit from high levels of advisor satisfaction, which translates into high retention and retained assets under management and production,” Lo said. “In the full service investing industry, client loyalty is often more closely aligned to the financial advisor rather than the firm. Dissatisfied advisors who leave their firms often take a majority of their clients with them, hitting the firms with a double whammy—a substantial loss in assets under management on top of the costs associated with training and recruitment.”

The 2010 U.S. Financial Advisor Satisfaction Study is based on responses from more than 2,800 financial advisors who hold a Series 7 license. Survey sample and industry weighting was provided by Qualified Media and Investment News. The study was conducted in two waves between February and March 2010 and July and September 2010.

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