J.D. Power has released its 2019 U.S. Full Service Investor Satisfaction Study, which shows most firms performing worse than last year.
The reason? The research firm polled some 4,630 investors around the time when the stock markets hit a tough period of volatility (November 2018 to January 2019). But, J.D. Power says, “amidst that struggle, important insights about what separates the best advisors in any market have emerged.”
The two charts above show the firms that ranked above and below the industry average, which fell by four points from last year to 835.
According to Mike Foy, senior director of Wealth Intelligence at J.D. Power, the shift from a bull market to more challenging markets means that investors are “increasingly re-examining the value of their advisor relationships.”
In other words, it’s not enough for financial advisors to simply reach out frequently to clients. They also need to “effectively explain and manage expectations” regarding performance, Foy says.
“It can be a difficult conversation when clients are losing money, but advisors who fail to have those hard conversations are putting at risk both their future growth opportunities, resulting in reduced client referrals and, in more extreme situations, losing their current clients either to other advisors or to alternative service models,” the researcher explained.
For investors working with advisor who took the time to thoroughly explain their 2018 investment performance to them, most — 53% — say they “definitely will” recommend their advisor to others vs. the roughly one-fourth — or 24% — of investors who did not receive such an explanation.
When it comes to the possibility of switching firms, just 10% of investors fully engaged with advisors put themselves in this category versus 20% of those who are less engaged.
J.D. Power’s U.S. Full Service Investor Satisfaction Study, in its 17th year, measures investor satisfaction tied to their work with a financial advisor, account information, investment performance, firm interaction, product offerings, commissions and fees, information resources, and problem resolution.
Over the past year or so, overall satisfaction with investment performance has declined 46 points (on a 1,000-point scale). Among high-net-worth investors (with $1 million or more of investable assets), the decline is 66 points.
According to J.D. Power improving mobile-based communications is essential.
“Given the critical importance of effective communication across channels, it is vital that firms upgrade investors’ perceptions of their mobile capabilities. Mobile continues to be the channel with the lowest satisfaction among full-service investors across all generational segments,” the firm said in a statement.
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