At a time when overall satisfaction with full-service financial advisors has plunged in lockstep with dismal stock market performance in 2022, Charles Schwab earned the highest ranking in the latest J.D. Power U.S. Full-Service Investor Satisfaction Study.
With an index score of 752 on a 1,000-point scale, Schwab scored 25 points above the industry average of 727 in overall satisfaction, and moved up to the top spot this year after finishing tied for third last year with a score of 753.
“This recognition is a reflection of the dedication and commitment of Schwab’s employees, in particular the thousands of retail client-facing professionals who keep clients at the heart of everything they do each day,” said Jonathan Craig, head of Schwab Investor Services.
UBS dropped from first in last year’s rankings to second this year with a score of 741, followed by Fidelity Investments (740), Lincoln Financial Group (739), Ameriprise (737) and Edward Jones (735). Those were the only six firms to finish above the industry average.
Vanguard and Northwestern Mutual fell from second and third in last year’s rankings to seventh (tie with Merrill at 725) and 15th (719) in the new rankings.
“Advisors cannot control the ebbs and flows of the market, but the good ones help their clients plan for their best futures and deliver value in the form of comprehensive advice that should shine through in all market conditions.”
Tom Rieman, J.D. Power
In 2022, Wall Street experienced its worst year since 2008, with the S&P 500 finishing down nearly 20%. Mirroring that performance, investor satisfaction with full-service investment advisors plunged 17 points year over year, according to the 2023 study, released last week.
In a statement announcing the study findings, J.D. Power said the fact that advisor satisfaction is tracking market performance shows that few advisors are delivering on their core value proposition, which will not bode well for the future of an industry that’s already struggling under the weight of digital transformation and changing patterns of investor behavior.
“Advisor satisfaction continues to track overall market performance, and this points to a systemic problem in our industry: advisor value propositions grounded in investment performance,” said Tom Rieman, head of wealth solutions at J.D. Power. “Advisors cannot control the ebbs and flows of the market, but the good ones help their clients plan for their best futures and deliver value in the form of comprehensive advice that should shine through in all market conditions.”
A few more key findings from the study:
- Small fraction of advisors currently offering comprehensive advice: Comprehensive advice is defined as personalized guidance from an advisor that addresses all financial and wealth management needs; demonstrates an intimate understanding of the client’s lifestyle and goals; puts the client’s best interest first; includes a financial plan; ensures clients understand the fees they pay; and is an integral part of the client’s life. Today, just 11% of advisors are delivering this level of advice. The rest are delivering transactional advice (42%) and goals-based advice (47%).
- Just more than half of full-service wealth clients have financial plans: Among full-service wealth management clients, 57% say they have a financial plan, yet only 56% of clients with plans say they are receiving comprehensive advice. Moreover, among clients with financial plans, 32% do not feel their advisor makes recommendations that are in their best interest and 29% say they do not feel their advisor understands their financial goals and needs.
- Younger clients ready to vote with their feet: Among clients in all age groups, those in the Millennial and Generation Z groups are the most likely to switch firms in the next 12 months and are most likely to already be working with a secondary investment firm. Slightly more than one-fourth (27%) of these younger investors say they “definitely will” or “probably will” switch firms, and 49% say they are working with a secondary investment firm.
The U.S. Full-Service Investor Satisfaction Study, now in its 21st year, measures overall investor satisfaction with full-service investment firms in seven factors (in order of importance): trust; people; products and services; value for fees; ability to manage wealth how and when I want; problem resolution; and digital channels.
The study is based on responses from 6,168 investors who work directly with a dedicated financial advisor or team of advisors. The study was fielded from October 2022 through January 2023.
SEE ALSO:
• Young Investors Much Prefer Apps Over Websites: J.D. Power
• Participants Not Satisfied with Retirement Plan Digital Experience: J.D. Power
• Big Shakeup in J.D. Power’s New Full-Service Investment Firm Rankings