From the May 2013 issue of Research Magazine • Subscribe!

FA Satisfaction as Measured by J. D. Power

Satisfaction among independent advisors made a nice improvement over the past year, while that of employee advisors declined slightly, according to the latest J.D. Power and Associates 2013 U.S. Financial Advisor Satisfaction Study.

The survey, which involves interviews of about 2,500 financial advisors each year and ranks BDs on a 1-to-1,000 scale, found that satisfaction among employee advisors is higher that it was two years ago. Among independent advisors, it has increased significantly in the past two years: The average is 695 for employee reps and 794 for independents—a nearly 100-point spread.

“The survey points to high levels of satisfaction amongst independent advisors,” said Mark Elzweig, a New York-based executive search consultant , in an interview. “As more wirehouse advisors know other advisors who have taken the plunge to independence and are happy, this will encourage more wirehouse advisors to seriously consider that option.”

According to J.D Power, most advisors fall into one of two groups: those who have high satisfaction and are “dedicated” to their investment services firm or broker-dealer; and those who are less satisfied and are “indifferent,” or those who lack a strong attachment that might otherwise affect their decision to remain with or leave a firm.

“The brand image of the firm an advisor works for or is affiliated with may have a direct impact on their client relationships and, as a result, may strongly influence advisor satisfaction,” said Craig Martin, director of investment services at J.D. Power and Associates, in a press release. “Advisor satisfaction is based on more than just firm brand image, but when client relationships are potentially harmed, it raises questions about the risks and rewards of being affiliated with a firm.”

In terms of the specific measurements, satisfaction of independent advisors is up 29 points from 2010 compared with a 12-point improvement among employee reps, the study found.

A high number of employee advisors, 36%, and a good number of independent reps, 23%, express an indifferent attitude about their current broker-dealer—a signal that they are open to the influence of recruiters and also rival BDs.

Top Ratings

For the third time in a row, Commonwealth Financial Network had the highest rating among independent broker-dealers and overall with an overall satisfaction score of 945—up from 917 last year and 50 points ahead of the second-place independent, Cambridge Investment Research.

“It is truly humbling to be the highest-ranked firm in the independent channel three times in a row,” said Commonwealth CEO Wayne Bloom, in a press release. “We take great pride in this award and attribute our strong performance to our respected advisors—who share our client-forward philosophy—and to our dedicated team who has helped shape the culture of Commonwealth into what it is today.”

On the employee-advisor side of the business, Edward Jones came out on top for the fifth time (since 2007) with a score of 907—just 38 points behind Commonwealth and 212 points ahead of the traditional-channel’s average satisfaction level.

“We believe this reflects our firm’s total alignment around serving our clients and supporting our branch teams,” said Edward Jones Managing Partner Jim Weddle, in a statement. “In our business model, branch teams focus on each client, while in the home office we offer support and expertise on investment guidance.”

Coming out second in the employee channel (with a score of 891) and third in the independent channel (at 879) is Raymond James.

“Raymond James is pleased to score so well on the Advisor Satisfaction surveys released by J.D. Power and Associates, in both the employee and independent channels,” said Chet Helck, CEO of Raymond James’ global private-client group, in a statement.

“We know advisors can be tough critics, and so to increase our scores, particularly in the areas of technology and firm performance, was especially satisfying,” Helck explained. “We continue to work hard on earning our advisors’ satisfaction, each and every day.”

Room for Improvement

Over the past 12 months, the satisfaction levels of advisors working for three out of the four wirehouses (Merrill Lynch, UBS and Wells Fargo) rose from the previous year’s levels. UBS, however, was the only wirehouse with a score that topped the industry average (at 751 vs. 695). 

For its part, Morgan Stanley says it does not believe the survey results reflect the true satisfaction level of its advisors, according to a statement. First, a Morgan Stanley spokesperson says, fewer than 150 out of its 16,000-plus FAs responded to the survey.

Second, J.D. Power did not ascertain whether or not these respondents were “representative of the FA population at large; given the tiny percentage who completed the survey, it is highly unlikely that they were,” a spokesperson commented.

(The general industry figure for the total number of advisors in the United States is roughly 300,000.)

But, notes Elzweig, broker-dealers ignore the J.D. Power survey results at their own peril. “The fact that such a hefty percentage of advisors in both the wirehouse and independent channel are indifferent toward their firms underscores their vulnerability to advisor defections,” he said. “Somehow, they’ve got to figure out how to make their advisor more deeply committed to the home team.”

Still, at least one firm—Morgan Stanley—doesn’t put much credence in the survey’s implications. “In fact, FA turnover has remained fairly constant across the industry for a number of years,” a spokesperson shared.

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