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July 15, 2015 at 11:34 AM
There’s “an undercurrent of dissatisfaction” within the advisor community toward their broker-dealers, the latest J.D. Power poll finds. Plus, advisor loyalty is also decreasing.
These shifts seem generally tied to changes in compensation and “a lack of confidence in firm leadership,” according to the J.D. Power 2015 U.S. Financial Advisor Satisfaction Study, released earlier this month.
On a 1-1,000 scale, overall satisfaction among employee advisors is 701, a 20-point drop from 2014. (The survey looks at factors such as advisor/professional support; client/customer-facing support; compensation; firm leadership; operational support; problem resolution; and technology support.)
“Many firms have made changes that increase deferred compensation to advisors, which helps increase short-term retention, but doesn’t foster loyalty,” said Michael Foy, director of the wealth management practice at J.D. Power, in a statement.
“Given the demographics of the advisor market and the stated goal of many firms to continue to invest in and grow their wealth management business, the demand for proven, successful advisors is likely to increase over time,” Foy explained.
The survey includes the views of some 3,300 FAs, many of whom work for the wirehouse firms (Bank of America-Merrill Lynch, Morgan Stanley, Wells Fargo and UBS), as well as for national firms or “super-regionals” like Edward Jones and Raymond James (RJF). The poll also incorporated the opinions of independent advisors who are affiliated with broker-dealers but are not employed by them.
Wirehouse Woes
Of the four wirehouse firms, two have higher satisfaction levels than in 2014. The improvement, though, is limited to 15 or 16 points.
The two wirehouses that have lower satisfaction levels this year are down sharply, but over 55 points in one case and by 90 in another.
Thus, on average, the wirehouse firms have satisfaction levels that are nearly 29 points off of last year’s levels, and just one of the four broker-dealers has a satisfaction level that is higher than the average level across all firms, 701.
“Overall, as you look at the wirehouse as a whole, clearly you see that loyalty is not and satisfaction is not as strong as at independent firms or at the super-regional firms,” Foy said in an interview with ThinkAdvisor. “Within the wirehouse segment, a lot of the declines are based on significant drops from [two firms] and modest gains at [the two others.]”
Nonetheless, “The year-over-year picture looks worse … and those that did better are still trailing the super-regionals and independents in satisfaction and loyalty,” he explained.
In reaction to the findings, Wells Fargo (WFC) said the results are “solid” and “reflect Wells Fargo Advisors’ emphasis on culture and our leaders’ focus on connecting with our advisors in meaningful ways. We’ll study the results carefully.”
Morgan Stanley (MS), though, is less upbeat on the poll: “The survey’s self-selected sample is too small to be statistically valid, and no attempt was made to determine if the sample was in any way reflective of the actual demographics of our advisor population,” the broker-dealer said in a statement.
