WESTLAKE VILLAGE, Calif.: 1 July 2015 — There is an undercurrent of dissatisfaction among advisors as loyalty to their investment firm has declined, due in part to changes with compensation and a lack of confidence in firm leadership, according to the J.D. Power 2015 U.S. Financial Advisor Satisfaction StudySM released today.
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 seven key drivers of advisor satisfaction: advisor/professional support; client/customer-facing support; compensation; firm leadership; operational support; problem resolution; and technology support. Satisfaction is measured on a 1,000-point scale.
Overall satisfaction among employee advisors is 701, a 20-point decline from 2014. With respect to loyalty, 83 percent of employee advisors say they “probably will” or “definitely will” stay at their current firm for the next one-to-two years (down from 89% in 2014), with many citing reasons unrelated to long-term firm loyalty. Among advisors intending to stay, 38 percent cite the primary reason as either contract requirements, compensation or simply that they have no reason to move, compared with 43 percent who cite primary reasons associated with enduring loyalty, such as firm leadership, culture, client focus or independence. In the independent segment, overall satisfaction is 773, which is 72 points higher than in the employee segment. Additionally, 89 percent of independent advisors say they “probably will” or “definitely will” stay with their current firm.
One key driver of declining advisor satisfaction and loyalty is compensation. Satisfaction with compensation has decreased among employee advisors, with 50 percent indicating negative changes to their payout during the past year, up from 41 percent in 2014. Just 9 percent of advisors indicate that their compensation plans have improved. Advisors with higher assets under management (AUM)—$150 million or more—are those that firms are most concerned about retaining; yet, they are more negatively impacted than advisors with lower AUM—less than $50 million. Many advisors believe their compensation plans are more aligned with corporate goals (86%) than with rewarding appropriate behaviors (64%), reflecting the perception among some advisors that there is pressure to sell products and services that may not be optimal for their clients. In contrast, in the independent segment, 72 percent of advisors indicate their compensation remained the same from 2014, while 11 percent indicate it improved. More than eight in ten (81%) of independent advisors indicate compensation rewards appropriate behaviors.
Firm leadership also plays a critical role in cultivating advisor satisfaction and loyalty. Advisor perceptions of leadership—both at the executive and local or branch levels—leave much to be desired. Nearly half (42%) of employee advisors indicate firm leadership fails to create a strong culture of accountability, and 50 percent indicate their immediate supervisor fails to keep promises/commitments. Many advisors also indicate that effective top-down communication is lacking, with just 43 percent saying that leadership clearly communicates strategic goals. Executives need to ensure that the lines of communication are open between leadership and advisors—from the executive suite to the day-to-day face of leadership at the firm’s branch—which can contribute to a culture that advisors desire and help them to effectively manage and grow their practice better than they could elsewhere or out on their own. In the independent segment, 49 percent of advisors indicate firm leadership creates a strong culture of accountability, and 45 percent indicate corporate leadership clearly communicates strategic goals.
“Many firms have made changes that increase deferred compensation to advisors, which helps increase short-term retention, but doesn’t foster loyalty,” said Michael Foy, director of the wealth management practice at J.D. Power. “Given the demographics of the advisor market and the stated goal of many firms to continue to invest in and grow their wealth management business, the demand for proven, successful advisors is likely to increase over time. While there is no evidence of an imminent mass exodus of financial advisors from their firms, we know that when advisors decide to leave their firm, they tend to take most of their clients and assets with them. Firms can’t afford to rely solely on short-term retention tactics like contracts and deferred compensation to retain these advisors. They need to build a culture that inspires loyalty.”
- Overall satisfaction among Gen Y/Z employee advisors is higher than among all other generations (809 vs. 787, respectively). Less experienced advisors benefit more from their affiliation with the firm from the training, mentoring and brand credibility compared with more established advisors. Additionally, Gen Y/Z advisors expect more technology support, compared with other generations.
- While 92 percent of employee advisors indicate their firm provides tablet-friendly tools, just 34 percent actively use a tablet for business, suggesting firms need to do a better job communicating the value of using such technology and training advisors on how to leverage these tools.
- Social media adoption is increasing, with 29 percent of employee advisors indicating they use it to communicate with clients, up from 24 percent in 2014. This is despite the fact that 45 percent of advisors indicate their firm does not permit this usage.
- While still underrepresented in the industry, women advisors are more satisfied than men (754 vs. 703, respectively), and they also exhibit a higher degree of loyalty to their firm based on such aspects as culture and client focus (55% vs. 41%, respectively). Firms should ensure they are leveraging successful, highly satisfied women advisors as advocates to help attract more women to the profession and to their firm.
Advisor Study Rankings
In the employee advisor segment, Edward Jones ranks highest for a sixth consecutive year with a score of 925. Raymond James & Associates, Inc. (885) ranks second, followed by Charles Schwab & Co., Inc. (785).
The 2015 U.S. Financial Advisor Satisfaction Study is based on responses from more than 3,300 financial advisors. The study was conducted between January and April 2015. No award is presented in the independent advisor segment due to insufficient market representation in the 2015 study.
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 J.D. Power defines generational groups as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); Gen Y (1977-1994); and Gen Z (1995-2004).