The J.D. Power 2017 U.S. Self-Directed Investor Study finds that a broker-dealer’s reputation and trading fees – preferably lower – are the two most important factors for investors deciding where to put their money. Nonetheless, firms need to “deliver value” or clients will move their money to even lower cost, or in some cases no-cost, options at rivals.
The latest self-directed investor survey, released Thursday, finds that the average level of customer satisfaction improved slightly from a year ago, to 779 out of 1,000. About half the firms received higher scores than last year, particularly those in the top three positions. Other firms saw their scores decline from a year ago.
"A confluence of factors including changes to technology, industry regulation, investor preferences and the competitive landscape is disrupting the industry and has created the conditions for a 'money in motion' event for self-directed investment providers," said Mike Foy, senior director of the wealth management practice at J.D. Power. "As transaction fees continue to approach zero, it's more critical than ever that firms differentiate by delivering a superior client experience, and that starts with successful onboarding."
This January, more than 4,600 self-directed investors participated in the poll, which is in its 16th year. The survey measures performance based on client interaction, account information, trading charges and fees, product offerings, information resources, and problem resolution.
“One trend we observe is that more traditional retail banks have been getting into this space over the past few years, like Citi, U.S. Bank and Chase,” Foy explained. “While they are not yet delivering experience that others — like the [survey] leaders — are offering, they do recognize that, as the wirehouses began to recognize a decade or so ago, … they want to serve more affluent clients.”
Despite lower overall satisfaction scores, these financial institutions seem “poised for growth in this space, especially with millennials, who indicate a greater openness to consolidate financial products and services with a single institution,” J.D. Power says.
Overall, 15% of self-directed millennial investors say they are using or have used a robo-advisor, and 25% of millennials using a full-service firm have done so. Among the self-directed group, 33% of millennials polled rate their experience with robo-advisors higher than that of their self-directed platform, J.D. Power finds.
“It is a threat on the one hand and an opportunity on the other,” Foy said.
Other key findings from the J.D. Power Research are:
- Onboarding as a “moment of truth”: An effective onboarding experience, include fee transparency and education, results in much more satisfied clients (822 vs. 773 for firms that don’t give investors this experience).
- Affluent millennials represent a huge opportunity/risk: Almost one-fourth (24%) of self-directed affluent millennials (with at least $100,000 in assets) "probably will" or "definitely will" leave their current firm in the next 12 months vs. just 10% of non-millennials; affluent millennials account for 68% of all "at-risk" assets among surveyed investors.
- Mobile trading volume up 152% in past seven years: The use of mobile devices by self-directed investors has nearly doubled; 63% of trades were conducted via mobile in 2017 vs. 25% in 2011.
-- Check out which firms are above the industry average on the next page --
-- Check out which firms are below the industry average on the next page --
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