For most do-it-yourself (DIY) investors, the level of satisfaction with their brokerage firm has not budged despite significant stock market growth in the past year, according to the J.D. Power 2024 U.S. Self-Directed Investor Satisfaction Study, released today.
Overall satisfaction among DIY investors this year is 708 (on a 1,000-point scale), up just one point from 2023 and even with 2021.
This lack of improvement amid a strong surge in stock market growth suggests that DIY investor satisfaction is no longer benefiting from the “halo effect” that typically comes with strong markets. J.D. Power notes firms have struggled to differentiate and add value for DIY investors as the industry moves deeper into the no-fee future.
“Retail brokerages need to rethink their role in their clients’ lives and start to deliver clear, quantifiable value, particularly to younger investors,” said Craig Martin, executive managing director and head of wealth and lending intelligence at J.D. Power. “The one area where we are seeing increased demand across all categories of investors—even those historically characterized as strictly DIY—is for some level of personalized guidance and support. Right now, that personal connection is really missing at many firms.”
The study found TD Ameritrade—which of course has been acquired by Charles Schwab—ranked highest when it came to self-directed investor satisfaction among do-it-yourself investors. TD Ameritrade had a score of 722, topping Schwab and Vanguard, which tied for second at 717.
The study, now in its 22nd year, evaluates key satisfaction drivers and firm performance among both true do-it-yourself investors (those who do not interact with professional advisors) and investors seeking guidance (those who don’t have a dedicated financial advisor but do have access to interact with a registered investment professional).
It measures self-directed investors’ satisfaction with their investment firm based on performance in seven factors (in order of importance): trust; digital channels; the ability to manage wealth how and when I want; products and services; value for fees; people; and problem resolution.
Fidelity tops ranking for investors seeking guidance
For the second straight year, J.D. Power found Fidelity ranks highest in self-directed investor satisfaction among investors seeking guidance.
Fidelity earned a score of 708, up slightly from the 704 it earned in the same study’s 2023 rankings. Charles Schwab (707) ranks a close second (up from a third-place ranking of 695 last year), while TD Ameritrade jumped from sixth place at 667 last year all the way up to a tie for third with Vanguard at 702. Vanguard ranked fourth last year at 690.
E*TRADE, which ranked second last year with a score of 698, fell to fifth this year at 694. The segment average ranking was 680, down slightly from 685 last year.
More key findings of the 2024 study:
- Buy-and-hold investors become defection risk: Investor satisfaction is highest among DIY investors who are trading more actively. It is lowest among those who tend to use a buy-and-hold strategy, which can limit their ability to see the market recovery benefit or adjust their portfolio to take advantage of increased rates from products such as fixed income securities. This could put customer loyalty at risk for firms that cater to less active investors.
- Guidance and advice become critical: While satisfaction among DIY investors is flat, satisfaction among self-directed investors in the seeking guidance category improves 15 points in 2024, signaling the importance of personalized guidance in driving overall investor satisfaction.
“Trust is going to be a key variable for brokerage firms as they fight to attract growing ranks of Millennial and Gen Z do-it-yourself investors,” said Kapil Vora, senior director of wealth intelligence at J.D. Power. “Right now, trust levels are flat and until firms find ways to better connect with investors, they are going to struggle to forge the strong relationships they need to differentiate and add value beyond just digital prowess.”
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Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.