Client satisfaction with full-service wealth management firms reached a record high in J.D. Power’s 2020 latest Investor Satisfaction Survey.
Overall satisfaction rose to 850, on a 1,000-point scale, up 15 points from the year before, driven primarily by satisfaction with investment performance, one of several factors that investors are asked to rate.
The survey of just over 4,500 investors was conducted from November 2019 through January 2020, when the stock market was still enjoying extremely strong performance before the coronavirus pandemic hit — the S&P 500 finished 2019 with a 29% gain.
“To some degrees there is a bit of a halo effect when portfolios are doing well,” said Michael Foy, senior director of wealth intelligence at J.D. Power. But that halo can be replaced by some very dark clouds when portfolios are performing poorly, as they are now and as they did during the fourth quarter of 2018.
“It’s hard to predict where we’ll be eight or nine months from now, but if we were in the field now I would certainly expect declining scores,” said Michael Foy, senior director of wealth intelligence at J.D. Power. He noted that the current market decline is of a far greater magnitude than the drop in late 2018.
Still, wealth management firms and their advisors are heading into the current market crisis with a high level of investor satisfaction. “Brands that have developed high-trust relationships with clients” will likely be able to retain those clients during the difficult year ahead and less likely to see those clients decrease their investments as a result of disappointing performance, Foy said.
Investment performance is one of several factors that investors rate in the J.D. Power survey and not the most important one. Satisfaction with a financial advisor has the greatest weight in the computation — 31% — followed by account information (16%), investment performance (14%) and firm interaction, which includes online, phone and mobile communications (13%). The other factors are product offering (10%), commission and fees and information resources (both 8%).
Leading the pack for investor satisfaction with wealth managers in the 2020 survey were RBC, Fidelity and Edward Jones.
RBC provides a “very high touch experience” for clients, said Foy, and it was among the firms with the biggest improvement in satisfaction rating from a year ago — 25 points. Also showing a big improvement in ratings were Fidelity, Wells Fargo Advisors, LPL, TIAA and AXA advisors, whose rating jumped 33 points though it was still near the bottom of the scale.
Fidelity saw a big improvement in in clients’ digital experience, including its mobile app, and improved on commission and fees, said Foy. Edward Jones, which ranked No. 1 last year, remains a perennial favorite based on its “effective template” for training advisors — who are often second career professionals — on how to interact with clients, said Foy.
Northwestern Mutual was one of only two wealth management firms that showed a decline in its annual customer satisfaction score this year, but its ranking fell to second from the bottom from third last year, losing just four points.
Advisor Group was the other firm to show a decline in customer satisfaction but its drop was steep, from No. 4 last year to No.15 (out of 21) this year.
Advisor Group has acquired multiple firms over the years, including most recently Ladenburg Thalmann, creating an investor network of nine IBDs. Such active M&A activity often has ”a negative impact on client satisfaction in the short term,” Foy said.
Other key findings of the J.D. Power survey:
- Digital contact is more important than ever. Advisors who use frequent digital communications such as email, texts, online and video are 50% more likely to see increased investment from clients.
- Trust is the great equalizer. Simply put, high-trust brands enjoy higher satisfaction, loyalty and greater referrals from clients even in difficult markets.
- ESG is growing in popularity. Seventy-six percent of investors who rate their firm a 9 or 10 for commitment to social causes say they “definitely will” recommend their firm to friends and family.
- Millennial women prefer female advisors. They’re nearly 2.5 times more likely than older clients to prefer working with one. This underscores the importance of hiring more female advisors since just 15%-20% of financial advisors are women now.
To see J.D. Power’s full rankings, check out the charts above.
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