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J.D. Power Ranks Self-Directed Firms

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Self-directed investors want to do more than “go it alone” when it comes to achieving their financial goals, the J.D. Power 2015 U.S. Self-Directed Investor Satisfaction Study finds. The current overall satisfaction level across marketplace is 763 (on a 1,000-point scale), which is unchanged from 2014 and up slightly from 752 in 2013.

The study, now in its 14th year and released in late May, includes the views of 3,700 self-directed investors and measures satisfaction with their investment firm based on six factors: interaction, account information, trading charges and fees, account offerings, information resources and problem resolution.

Most investors with guidance-based relationships, 64%, are likely to recommend their firm to friends and family, and many, 45%, are poised to increase their investment levels with the firm vs. those who do not have this type of relationship, of whom just 26% are likely to make referrals and only 29% plan to boost investments, J.D. Power explains in a press release.

The 2015 survey finds that consumers are more satisfied with three of the top seven firms than they were a year ago and less satisfied with the remaining four. Of the 10 firms highlighted in the poll, satisfaction increased for six firms and dropped for four.

The J.D. Power survey also shows that overall satisfaction is higher among self-directed investors who have a guidance-based relationship (and had an average satisfaction level of 828) than among those who do not (656). Looking at what most impacts satisfaction, providing digital tools for asset allocation, financial planning, and tracking/monitoring portfolio performance seems most critical.

Investment firms have room for improvement when it comes to transparency: Just 40% of investors state that they fully understand the fees they pay. Furthermore, investors who receive a clear explanation of fees are more than three times more likely to say they completely understand the fees vs. those who did not receive such an explanation (50% vs. 16%).

As for investment style, two-thirds, or 66%, of self-directed investors describe themselves as true do-it-yourselfers, while slightly more than one-fifth, 21%, consider themselves “validators” who prefer to have a professional act as a sounding board for their ideas.

The remaining 13% consider themselves “collaborators” who tend to make decisions collectively with help from some sort of advisor. The portion of validators and collaborators is higher among Gen Y and Gen Z (38%) and female investors (38%) than among their older, male counterparts, according to J.D. Power.

“Firms need to make sure that their clients understand what’s available to them and how the overall value proposition relates to what they pay,” said Mike Foy, director of the wealth management practice at J.D. Power, in a statement. “In most cases, clients are getting a lot more value from their firm than just the ability to trade.”

Commenting on Charles Schwab’s top slot in 2015, President and CEO Walt Bettinger said: “In announcing their latest rankings, J.D. Power emphasized that being a self-directed investor doesn’t mean going it alone, and that self-directed investors really do want a relationship with their firm that includes access to do-it-yourself tools and resources, as well as help and guidance and superior service when you need it. That couldn’t be truer at Schwab.”