Edward Jones and Fidelity Investments rank the highest among full service investment firms when it comes to overall satisfaction among investor clients, according to the J.D. Power 2015 U.S. Full Service Investor Satisfaction Study. The two tied with a score of 812 each on a 1,000-point scale.
Edward Jones particularly shines when it comes to investment advisor and investment performance, while Fidelity excels in account information and account offerings. Charles Schwab Corp. (SCHW) and Wells Fargo Advisors rank third, also in a tie, scoring 810 each. Raymond James Financial Inc. (RJF) follows close behind with a score of 809. (For more, see: Advisors: Avoid These Common Mistakes.)
The study is based on responses from more than 5,300 investors who make some or all of their financial decisions with an advisor. It measured overall investor satisfaction with seven factors, listed here in order of importance: investment advisor, investment performance, account information, account offerings, commissions and fees, website and problem resolution. Overall investor satisfaction remained unchanged from 2014, clocking in at 807. (For related reading, see: The 15 Fastest-Growing RIAs.)
Missing the Next Generation
The study maintains that despite an aging investor demographic and the anticipated massive generational transfer of wealth looming 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 today with the new generation. (For more, see: Why Advisors Should Focus on Relationships.)
The median age among full service investors is 61. Financial advisors and firms are missing a big opportunity to position themselves for the generational transfer of wealth over the next few decades, said the study. Despite the fact that 71% of investors have named next-gen beneficiaries, only 42% have been asked by their advisor to have a conversation on this topic. (For relating reading, see: Is 'Free' the Best Price for Online Financial Advice?)
For investors who have named next-gen beneficiaries, 33% of the beneficiaries have an account or product with that same firm. The proportion of beneficiary accounts increases by 24% when advisors ask their clients about beneficiary needs, the study found.
“Talking to clients about their beneficiaries may feel awkward to many advisors, but most investors want their wealth to benefit the next generation,” said Mike Foy, director of the wealth management practice at J.D. Power. “Many times, investors themselves struggle in money-related conversations with their kids, and an advisor is in a unique position to be a bridge between generations. Firms that can effectively train and support their advisors in this regard have a real opportunity to differentiate their services.” (For more, see: Estate Planning Tips for Your Elderly Clients.)
Trust and Loyalty Problems
The study found that there are generational differences when it comes to the trust investors place in their advisors. Sixty-seven percent of pre-Baby Boomers (born before 1946) felt their advisor makes recommendations in their best interest, while only 40% of Gen Y (1977-1994) and Gen Z (1995-2004) said the same. (For more, see: Why Client Breakups Are Not Always a Bad Thing.)
Higher client satisfaction also results in significant increases in advocacy, loyalty and share of investment wallet for firms. For firms that ranked above the industry average, 48% of investors said they “definitely will” recommend their firm versus only 37% with firms ranking below average.
When it comes to loyalty, 46% of investors who are clients at firms that perform above the industry average said they “definitely will not” switch firms. This compares to 38% of investors with firms that perform below average.
The Bottom Line
One of the most important takeaways in the study for financial advisors and firms is that they are not doing enough to establish relationships with their clients’ beneficiaries. They risk losing the next generation’s assets. For advisors it can be as simple as asking clients about their beneficiaries to get the ball rolling. (For more, see: Want a Career in Asset Management? Read This First.)