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Industry Spotlight > Women in Wealth

J.D. Power Ranks Full-Service Firms

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J.D. Power’s latest survey of investors working with financial advisors shows their overall level of satisfaction is unchanged from last year at 807 on a 1–1,000 scale, weakening among several of the top-rated broker-dealers. Given investor concerns with retirement income and what they can leave to their children, both advisors and firms need to step up and strengthen their ties to clients, the research firm says.

“With an aging full-service investor demographic and an anticipated enormous generational transfer of wealth on the horizon, investment firms are not asking the right questions of their clients and may be at risk of losing assets if they fail to establish relationships now with the next generation,” J.D. Power said in a statement about its 2015 U.S. Full Service Investor Satisfaction Study, in early April.

The survey, which included the views of about 5,300 investors, finds that 71% of investors want to talk about their wealth transfer plans and needs with their full-service advisors, but just 42% have been asked by their advisors to engage in such discussions. Investor satisfaction is higher among those asked by their FAs about next-generation issues, 854, than those who are not asked, 793.

Job to Do: Collaborate

“Think about the individual-investor demographic,” said Mike Foy, director of J.D. Power’s wealth management practice, in an interview. “The average age of investors in our study is 61, and others studies are similar.”

The wealth transfer “is looming on the horizon” for these clients, Foy says. When they are asked about this issue, satisfaction with their advisor relationship “tends to increase,” he adds.

Such discussions are a key in driving the relationship forward and in building asset growth with the next generation. “When it comes to raising the issue and bringing this up in conversations, advisors should be doing more.”

Boosting communication skills is critical for improving relationships with female clients, as well, and it may be more important than having them speak with female advisors, according to Foy.

“What we saw in the research is that having a woman advisor is not necessarily having the [greatest] impact on women [client] experiences. The most critical factor that women put a high value on is having a relationship based on trust,” he explained. “It means having an advisor who has the client’s long-term interest in mind and is working in concert” with these investors.

In addition, advisors need to reach out to spouses much more consistently. The study finds that 23% of investors work with advisors who do not interact with their spouse or partner. This means the FAs are “missing a tremendous opportunity to retain the household wealth over the long term,” the research group points out.

Now in its 13th year, the J.D. Power study aims to measure investor satisfaction with full-service investment firms by looking at how clients feel about their advisor, investment performance, account information, account offerings, commissions and fees, website and problem resolution.

This year, the group says just five points separate the highest-ranked investment firms and the industry average (812 vs. 807). This suggests investors perceive limited differentiation in their experience among industry firms.

The top firms include Fidelity Investments. Only one of the four wirehouse firms beat the industry average, coming in with the fourth-highest score.

“In recent years, the [wirehouses] have been consistently in the middle of the pack rather than at the top,” Foy said. “This may have to do with damage to the brands during and after the financial crisis.”

Compared with firms like Fidelity or Charles Schwab, the wirehouse firms may do reasonably well in terms of investor satisfaction with the advisor, but not as well when it comes to fees and commissions. “The perception is that these are high. It’s one area where the [wirehouses] are challenged,” explained the researcher.

In addition, some investors perceive the three New York-based wirehouses as “almost interchangeable,” Foy states. “The advisors tend to move around the organizations pretty often, which maybe says they don’t have as unique a position in market” as they would like to project.

Investors are interested not just in how much they are paying for full-service advising but why they pay certain fees. “They tell us, ‘I want an advisor who is working with me to simplify and help me understand what I am paying for,’ ” Foy stated.

While Fidelity, for instance, is well known in asset management, retirement and discount brokerage work, “It’s increasingly building up a wealth-management profile and activities and leveraging its strengths,” he said, which includes delivering account information, products, website tools and marketing. This makes the firm “pretty successful with the client experience.”

The annual study also reveals that 48% of investors working with firms with scores above the industry average say they “definitely will” recommend their firm vs. 37% of investors with firms ranking below the average. In addition, 46% of investors of firms that perform above industry average say they “definitely will not” switch firms, which is the case for 38% of investors with firms that perform below average.

For its part, Morgan Stanley disagrees with J.D. Power’s assessment of investor satisfaction.

“The survey is based on a tiny number of respondents, averaging 300 per firm, that skew to lower-income households,” the firm said in a statement. “J.D. Power made no effort to ascertain whether [its] statistically questionable sample was actually representative of our client base. Other third-party surveys of much larger, validated client samples consistently show high satisfaction rates of 96% or higher.”


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