Overall investor satisfaction with full-service investment firms continues to rise, according to the J.D. Power 2014 U.S. Full Service Investor Satisfaction Study, released early Thursday. However, there’s a clear satisfaction gap between young investors (35 years and younger) and older investors, the group notes.
The industry average rose to a satisfaction score of 807 (out of 1,000) from 789 in 2013. But the four wirehouses all fell below the average score this year.
Last year’s bull market certainly made lots of investors happy. “In our model, we see that portfolio performance tied to only about 20% of overall satisfaction,” said Craig Martin, director of investment services at J.D. Power, in an interview with ThinkAdvisor. Advisors play a very significant role in influencing the level of satisfaction that investors experience, Martin says.
This dynamic may be hurting the wirehouses, Martin says, since their advisors may be delivering inconsistent service across all investors. (The study polled 4,400 investors who work with advisors nationwide.)
“They have some amazing advisors with … high levels of investor satisfaction and loyal relationships versus others with inconsistency relative to the top performers,” he explained.
While they have come up a little bit in their scores, several — Bank of America/Merrill Lynch (BAC), Morgan Stanley/Smith Barney (MS) and Wells Fargo/Wachovia (WFC) — are “recovering from what went on in ’08-’09 with mergers and other factors that took a toll on the customer side of the business.”
That’s meant that investment firms like Fidelity, Edward Jones and Raymond James (RJF) have stood out.
“The firms that have above-average performance have clear corporate cultures, well-established ways in how they interact with clients and more standardized approaches,” Martin explained. “For example, they may be very consistent in what investors get from a financial advisor … in terms of key performance indicators tied to developing a detailed financial plan, as well as more online and tech support to facilitate this effort.”
Consistency in communications, plan reviews, risk discussions and execution is important, he adds.
“This is definitely showing up in our data, especially clear communication around what’s behind a client’s investment performance and the amount of interaction,” Martin noted. “It’s not a question of whether or not it’s done weekly, but how you (as an advisor) are regularly facilitating info-sharing that meets customer needs.”
For instance, the higher-performing investment firms have websites that are effective in putting a financial plan together online that investors can revisit. These are features of the firms’ business model, Martin says. Demographic Drift
Investors age 18 to 35 are less satisfied with the full-service investment firms, 791, than older investors, 827.