Overall Investor Satisfaction Surges, Problems Remain

July 21, 2010

This article is included in these additional categories:

Analytics, Automated & MarTech | Data-driven | Financial Services

Despite a considerable improvement in overall investor satisfaction from 2009, investor perceptions of their investment firm as being customer-driven continue to decline, according to the J.D. Power and Associates 2010 U.S. Full Service Investor Satisfaction Study.

Overall Satisfaction Grows 38 Points
The study finds that overall investor satisfaction averages 769 on a 1,000-point scale, improving substantially from 731 in 2009. The primary drivers of the increase in satisfaction are improved satisfaction with the financial advisor relationship and investor perceptions of investment performance, which reflect both improvement in market conditions and increased reliance on and satisfaction with advisors.

Investors See Their Firms as Profit-driven
Although general satisfaction is up, investors’ positive sentiment regarding their investment firm continues to decrease, particularly in terms of the firm’s general reputation and investor perceptions as being customer-driven. Overall, an increasing proportion of investors in 2010 indicate they believe their investment firm is driven by profits, rather than focused on customers, compared with 2009.

Communicating Investment Reasons Spikes Satisfaction
The study finds that performing certain practices may have a positive impact on satisfaction with the financial advisor and the overall investment experience. In particular, communicating reasons for investment performance has a considerably strong impact on satisfaction. Among customers who receive this information, overall satisfaction averages 809, more than 150 points higher than satisfaction among customers who do not receive such information (655).

Other means of improving investor satisfaction with a particular firm include fostering engaged client/advisor relationships that involve the development of an investment strategy; periodic review of investment objectives; regular communication around and reasons for investment performance; and a clear explanation of fees and commissions may lift overall satisfaction.

Satisfaction Improves Firm Performance
The study also finds that investor satisfaction has a substantial impact on firm performance, as highly satisfied investors lead to a greater share of wallet, more referrals, and higher levels of loyalty and retention. As a result, firms can see an average incremental increase in assets under management of $125,216 among highly satisfied investors (scores of 900 or higher, on average), compared with a loss of $5,929 in assets per investor, on average, among investors with low levels of satisfaction (less than 700).


Edward Jones Ranks Highest Again
Edward Jones ranks highest in investor satisfaction for a second consecutive year with a score of 794 and performs particularly well in investment advisor and investment performance. RBC Wealth Management follows closely in the rankings with a score of 793, performing particularly well in investment advisor and account information. LPL Financial ranks third with 791 and performs well in investment performance and investment advisor.

Complete Belief in Financial Institutions Low
Very few Americans find statements by financial institutions completely believable, according to a recent Harris Poll. Accounting firms generated the highest percentage of Americans who find statements by their spokespeople completely believable, which was only 5%. A mere 2% of Americans find statements from investment firms, health insurance companies, mortgage companies and credit card companies completely believable.

About the Data: The 2010 US Full Service Investor Satisfaction Study is based on responses from 4,460 investors who make some or all of their investment decisions with an investment advisor. The study was fielded in May 2010.

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