2010 Canadian Full Service Investor Satisfaction Study

A new study by J.D. Power and Associates confirms that investors are changing their behavior as a result of the recent financial turmoil, diversifying their portfolios to minimize risk in a still uncertain market. The recently released J.D. Power and Associates 2010 Canadian Full Service Investor Satisfaction Study^SM reveals that while investor satisfaction has increased considerably from 2009, investors are taking a more cautious approach by diversifying their portfolios among investment firms. According to the study, the percentage of investments held with an investor’s primary firm has decreased slightly to 78 percent, on average, from 81 percent in 2009.

“As the economy recovers, investors are taking a more cautious approach, and are exploring their investment choices and using more firms to manage their assets, rather than keeping all their eggs in one basket,” said Lubo Li, senior director and leader of the financial services practice at J.D. Power and Associates, Toronto. “As the industry provides investors with more choices, the marketplace has become more competitive and clients have become more demanding. Understanding and meeting investor needs and expectations is key to ensuring loyalty.”

While diversification is widely considered a sound strategy for investors, it creates challenges for investment firms. Increased diversification means the potential for reduced customer loyalty as investors look to reduce their risk by spreading their investments across a number of firms and financial products, potentially increasing the costs associate with customer retention. According to the study, only 14 percent of investors strongly agree that they feel loyal to their primary firm, compared with 21 percent in 2009. Similarly, only 13 percent of investors report that they are strongly committed to their primary firm, compared with 20 percent in 2009.