WESTLAKE VILLAGE, Calif.: 11 April 2013 — As investor confidence grows and perceptions of wealth management firms improves, so do advisor perceptions of their firm—particularly among independent advisors—according to the J.D. Power and Associates 2013 U.S. Financial Advisor Satisfaction StudySM released today.
- Satisfaction among independent advisors has improved by 29 points since 2010, compared with a 12-point increase among employee advisors during the past two study cycles.
- Highly satisfied advisors want their firm or broker-dealer to focus on customers, not just profits.
- More than one-third (36%) of employee advisors and 23 percent of independent advisors (31% combined) are indifferent toward their firm or broker-dealer, making them at risk for changing firms.
The study measures satisfaction among both employee advisors
(those who are employed by their investment services firm) and independent advisors
(those who are affiliated with a broker-dealer but operate independently). The study examines nine key drivers of employee advisor satisfaction (in order of importance): firm performance; compensation; contact; people; job duties; work environment; products and offerings to clients; technology; and services and support offered to financial advisors.
The study also examines eight key drivers of independent advisor satisfaction (in order of importance): firm performance; people; contact; job duties; compensation; technology; products and offerings to clients; and services and support offered to financial advisors.
While overall satisfaction among employee advisors is relatively unchanged in 2013, compared with 2012, it is up 12 points (on a 1,000-point scale) since 2010, while overall satisfaction among independent advisors increases 20 points from 2012 and 29 points since 2010.
"Generally speaking, individuals are happier when they are successful, and a financial advisor's success is heavily dependent on the relationships they are able to develop with their clients," said Craig Martin, director of investment services at J.D. Power and Associates. "The brand image of the firm an advisor works for or is affiliated with may have a direct impact on their client relationships and, as a result, may strongly influence advisor satisfaction. Advisor satisfaction is based on more than just firm brand image, but when client relationships are potentially harmed, it raises questions about the risks and rewards of being affiliated with a firm."
The study finds that the majority of advisors fall into one of two categories: those who have high satisfaction and are "dedicated" to their investment services firm or broker-dealer; and those who are less satisfied and are "indifferent," or those who lack a strong attachment that might otherwise impact their decision to remain with or leave a firm.
Dedicated advisors say they either "definitely will" or "probably will" remain with their current firm in the next year because they believe the firm is a good place to work; has strong cultural values and beliefs; and is focused on the customer rather than on the bottom line. Indifferent advisors, as a group, are not as satisfied with their firm or broker-dealer, but remain there because they have a financial incentive to stay; don't have a good reason to leave; or are under contract and can't leave.
The study finds that 45 percent of employee advisors and 44 percent of independent advisors are dedicated (45% combined), while 36 percent of employee advisors and 23 percent of independent advisors are indifferent (31% combined).
"With indifferent advisors, because there is no strong connection to their firm, they are likely to be more open to discussions and opportunities with another firm or broker-dealer if the right offer comes along," said Martin. "Additionally, when an advisor leaves, they usually take a large percentage of their clients with them. That means the firm or broker-dealer not only loses an advisor, but also customers, and one of their competitors gains both. Given this combined effect, there's potentially a substantial positive economic impact on the firms or broker-dealers that are able reduce their number of indifferent employee advisors and improve advisor retention."
So how can firms improve advisor satisfaction and increase loyalty? Findings from the study show that it begins with a positive corporate culture—being honest and focusing on customers--and providing advisors with the tools and support they need to effectively service their clients. One of the key areas of advisor support is problem prevention and resolution.
"The study finds that more than 40 percent of advisors experienced a problem, such as a computer issue or paperwork error, in the past 12 months," said Martin. "Limiting the number of problems and ensuring effective problem resolution processes are in place are key components of advisor satisfaction."
Advisor Satisfaction Rankings
Edward Jones ranks highest in overall satisfaction among employee advisor firms, with a score of 907, and performs particularly well in the work environment, job duties and firm performance factors. Raymond James & Associates, Inc., ranks second overall (891), and performs well in the compensation and firm performance factors.
Commonwealth Financial Network ranks highest in overall satisfaction among independent advisor firms with an overall score of 945. The firm also earns high scores in the firm performance, people and job duties factors. Cambridge Investment Research, Inc., ranks second (895) and Raymond James Financial Services ranks third (879).
The 2013 U.S. Financial Advisor Satisfaction Study is based on responses of more than 2,500 financial advisors. Survey sample and industry weighting was provided by Qualified Media and Investment News. The study was conducted between October 2012 and February 2013.
Headquartered in Westlake Village, Calif., J.D. Power and Associates is a global marketing information services company providing forecasting, performance improvement, social media and customer satisfaction insights and solutions. The company's quality and satisfaction measurements are based on responses from millions of consumers annually. For more information on car reviews and ratings, car insurance, health insurance, cell phone ratings, and more, please visit JDPower.com. J.D. Power and Associates is a business unit of The McGraw-Hill Companies.
The McGraw-Hill Companies, to be renamed McGraw Hill Financial (subject to shareholder approval), is a powerhouse in credit ratings, benchmarks and analytics for the global capital and commodity markets. Leading brands include: Standard & Poor's Ratings Services, S&P Capital IQ, S&P Dow Jones Indices, Platts, CRISIL, J.D. Power and Associates, McGraw-Hill Construction and Aviation Week. The Company has approximately 17,000 employees in 27 countries. Additional information is available at www.mcgraw-hill.com.
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