Many Full Service Investment Firms are Missing the Mark with Younger Investors

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Fidelity Investments Ranks Highest in Full Service Investor Satisfaction

WESTLAKE VILLAGE, Calif.: 10 April 2014 — While overall investor satisfaction continues to rise, there is a clear satisfaction gap between young investors (35 years and younger) and older investors, according to the J.D. Power 2014 U.S. Full Service Investor Satisfaction StudySM released today.

Overall investor satisfaction with full service investment firms improves to 807 (on a 1,000-point scale) in 2014, up from 789 in 2013. Young investors (35 years and younger) are overall less satisfied with their full service investment firm than their older investor counterparts, averaging 791 compared with 806 for investors nearing retirement and 827 for retirement investors.  

“Advisors tend to focus their attention on older, more affluent investors with whom they have more experience,” said Craig Martin, director of investment services at J.D. Power. “They are comfortable with this group and their preferences, but when they interact with younger investors they have challenges connecting.  They often try to use the same approach that has been successful with their older clients, but it often misses the mark.”

Younger investors are less likely than older investors to characterize the advisor-investor relationship positively. Among young investors, less than half (44 percent) indicate they “strongly agree” that their advisor has a good understanding of their investment goals. In contrast, 71 percent of retirement investors say the same. Additionally, only 39 percent of young investors “strongly agree” that their advisor makes efforts to ensure they understand where their investments are made and why, compared with 66 percent of retirement investors. 

“Understandably, firms are going to place added focus on the clients and prospects with the greatest wealth,” said Martin. “But often the time and effort that is spent trying to engage with younger investors is not productive because it fails to demonstrate an understanding of their unique needs and wants. Advisors know that satisfying their younger clients is crucial for the long-term growth of their business.”

KEY FINDINGS

  • Communication is an important component of building strong relationships; however, there is considerable variation among the age groups in terms of the preferred communication channel; the frequency of communicating; and the subject of the communication. While phone is still the most preferred contact channel overall, younger investors are increasingly open to other channels, including email and social media.
  • While proactive contact is important to building strong relationships, over-communicating can come across as pushy or unproductive. Satisfaction among older investors begins to wane after eight to 11 contacts, while satisfaction among younger investors peaks at three to four contacts. To ensure the most value is gained from proactive communications, advisor contacts need to focus on the topics most pertinent to the target segment of the population.
  • Like consumers in general, investors want to understand exactly what they’re paying for. Among the 43 percent of investors who say they “completely” understand their investment firm’s fee structure, satisfaction with commissions and fees averages 750. That score drops to 619 among the 46 percent of investors who only “partially” understand their fees. At the same time young investors have the lowest rate (65%) of indicating advisors explaining the fee structure to them, a KPI.
  • While only 5 percent of investors experience a problem with their investment firm, overall satisfaction declines by 115 points when they do. Problem incidence among young investors is 12percent—more than double industry average—compared with 10 percent in 2013.

The study, now in its 12th year, measures overall investor satisfaction with full service investment firms in seven factors (in order of importance): investment advisor; investment performance; account information; account offerings; commissions and fees; website; and problem resolution.

Study Rankings

Fidelity Investments ranks highest in overall investor satisfaction with a score of 842. Fidelity Investments, which ranked second in 2013 and has improved by a significant 32 points year over year, performs particularly well across all seven factors. Edward Jones ranks second with a score of 835, and Charles Schwab & Co., Inc. ranks third with a score of 825.

The 2014 U.S. Full Service Investor Satisfaction Study was fielded in January and February 2014 and is based on responses from more than 4,400 investors who make some or all of their investment decisions with an investment advisor.

About J.D. Power and Advertising/Promotional Rules http://www.jdpower.com/about/index.htm
About McGraw Hill Financial www.mhfi.com 

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