Advisors Who Work with Investors to Set and Incorporate Goals into an Investment Strategy Are Key to Improving Satisfaction in Canada
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Edward Jones Ranks Highest among Full Service Investment Firms in Canada for a Second Consecutive Year
TORONTO: 21 August 2014 — Satisfaction improves significantly when full service investment advisors collaborate with investors to set personal financial goals and then develop an investment strategy and performance review process around those goals, according to the J.D. Power 2014 Canadian Full Service Investor Satisfaction StudySM released today.
The study provides benchmarks of satisfaction that allow individual investment firms in Canada to compare their performance with other firms included in the study. Overall investor satisfaction with full service investment firms and financial institutions that offer wealth management and private banking services is measured in seven factors (in order of importance): investment advisor (39%); investment performance (18%); account information (17%); account offerings (14%); commissions and fees (8%); website (3%); and problem resolution (1%).
Overall satisfaction improves to 755 (on a 1,000-point scale) from 737 in 2013. The study finds a strong correlation between investor satisfaction and actual market performance, with only 10 percent of investors indicating their portfolio performance did not meet expectations in 2013, compared with 17 percent in 2012. Satisfaction in the investment advisor factor is highest among investors who attribute the increase in their portfolio performance to their advisor’s decisions. Investment performance satisfaction has improved by a significant 31 points year over year to 703 in 2014, the highest level in the past four years (667 in 2011).
“While market conditions and investment performance remain strong, full service investment advisors need to differentiate themselves from the competition,” said Michael Foy, director of the wealth management practice at J.D. Power. “Providing goal-based advice is a great way to engage investors from the start and stay connected with them throughout their investment years. It begins with setting clearly defined goals, developing a strategy to achieve those goals that incorporates the investor’s risk tolerance, and then regularly tracking performance against the goals. Investment advisors who provide this level of service are not only more likely to have better relationships with investors, but their investors are also more likely to credit them rather than the market for positive investment performance and to be less critical when performance declines.”
- Only one-third (33%) of investors indicate that their advisor has met all three key criteria related to goals-based planning: helping set investment goals; incorporating risk tolerance into the plan; and providing insight into the progress toward achieving goals.
- Investment advisor satisfaction is highest among Pre-Boomer investors at 870—which is 50 points above the industry average of 820—and lowest among Gen Y investors at 758. While age is often a proxy for wealth levels affluent investors in Gen X and Gen Y are also less satisfied than older investors, suggesting firms need to better understand and adapt to the needs and priorities of these younger investors.
- Reaching Gen X and Gen Y investors through the communication channels they prefer and aligning messages with their needs may have a strong impact on future investment firm growth. Email is the preferred channel among Gen X (33%) and Gen Y (32%) investors, compared with Pre-Boomers (12%) and Boomers (22%). Younger investors’ financial goals tend to include funding such major purchases as a home or their childrens’ education.
- Investors want transparency surrounding their fees and portfolio performance. Performance in this area continues to decline, with only 55 percent of advisors delivering on this metric, compared with 57 percent in 2013. When advisors explain the firm’s fee structure, satisfaction increases by 95 points to 798 from 703 when the fee structure isn’t explained. Only 32 percent of investors indicate receiving a benchmark comparison on portfolio performance.
- Firms that successfully help advisors develop investor-focused relationships build loyalty, recommendations and increased asset share over time. Among investors of an investor-focused firm, 66 percent say they “definitely will not” switch to another investment firm; 25 percent “intend to increase” the amount invested with the primary firm; 59 percent say they “definitely will” recommend their primary investment firm; and 65 percent “definitely will” recommend their investment advisor.
Investment Firm Rankings
Edward Jones ranks highest in investor satisfaction among full service investment firms in Canada, with a score of 791, an 18-point increase from 2013. Edward Jones performs particularly well in four factors: investment advisor; investment performance; account offerings; and commissions and fees. Following in the rankings are HollisWealth (formerly DundeeWealth) and TD Wealth Private Investment Advice (tied at 790 each).
The 2014 Canadian Full Service Investor Satisfaction Study is based on responses from 4,623 investors who use advice-based investment services from financial institutions in Canada. The study was fielded in May and June 2014.
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