U.S. wealth management firms have a serious advisor engagement problem, according to the J.D. Power 2023 U.S. Financial Advisor Satisfaction Study, released today.
The big takeaway is that nearly one in three (28%) advisors say they don’t spend enough time with their clients, and therefore they can’t deliver the sort of experience and build the sort of relationships clients want and need. With markets struggling, compliance and administrative responsibilities growing and the advisor population aging, the study found many advisors are planning their own exit strategies. One in five (20%) advisors say they are 5 years or less away from retirement.
“In difficult market conditions like the ones we’ve been experiencing for the past several years, great investment advisors set themselves apart by proactively addressing their clients’ needs, delivering comprehensive guidance and communicating clearly and frequently about the issues that matter most to their clients,” said Craig Martin, executive managing director and head of wealth and lending intelligence at J.D. Power. “Right now, many advisors are struggling to find the time to deliver the level of hands-on service they know is critical to growing their business. They’re spending more time on administrative and compliance-oriented tasks and, in many cases, they are starting to question whether their firm is committed to providing them with the support and resources they need to succeed.”
Beyond not having enough time to spend with clients, the 28% of advisors who report this also spend an average of 41% more time each month than their peers on non-value-added tasks, such as compliance and administrative duties.
Net Promoter Scores (NPS), a measure of advisor advocacy, among those who say they do not have enough time to spend with clients are 27 points lower (on a -100 to 100 scale) among employee advisors and 30 points lower among independent advisors when compared with advisors who say they do have enough time to spend with clients.
Following are some additional key findings of the 2023 study:
- One eye on the exit: With the average age of U.S. financial advisors being 56 years old, 20% of advisors indicate that they are five years or less away from retirement. In addition, 30% of employee advisors and 28% of independent advisors say they “probably will” be working for their current firm in the next one to two years as opposed to saying they “definitely will.” This suggests that even if advisors are not contemplating leaving the industry or their firm, many may become apathetic about their situation. Among these two groups, overall satisfaction and NPS scores are significantly lower than among advisors who say they are strongly committed to their firms, meaning they could be perceived as hampering efforts to attract and retain talent.
- Female advisors lean in: Among employee advisors, overall satisfaction and NPS scores are significantly higher among female advisors than among their male counterparts. The overall satisfaction score among female employee advisors is 637 (on a 1,000-point scale) and the average NPS is 59. These compare with an average overall satisfaction score of 578 and an average NPS of 36 for male employee advisors. Among independent advisors there is not a material difference in overall satisfaction and NPS scores between genders.
- Strong leadership, support and professional development matter: Among employee advisors who are most likely to stay with their firm for the long term, the top reasons given for staying are a strong culture and company leadership. Other key factors influencing advisor retention and advocacy include professional development support and training and technology.
Study rankings: Scores decline again
Among employee advisors, Stifel ranks highest in overall satisfaction with a score of 777. Raymond James & Associates (711) ranks second and Edward Jones (672) ranks third.
While the study was redesigned for 2023, overall scores continue on a downward trend. In last year’s study, Edward Jones had the top ranking with a score of 876, followed by Stifel (872) and Raymond James (863). While the segment average was 745 last year, this year it dropped to 588.
Among independent advisors, Commonwealth again ranks highest in overall satisfaction with a score of 798 (down from its score of 918 last year). Raymond James maintained second place with a score of 697 (down from 842 last year), while Ameriprise (664) and Cambridge (664) rank third in a tie. Ameriprise was also third in last year’s study (821).
The segment average in the 2023 study (see chart below) was 626, down from 781 in last year’s study.
The redesigned U.S. Financial Advisor Satisfaction Study was measures satisfaction among both employee advisors (those who are employed by an investment services firm) and independent advisors (those who are affiliated with a broker-dealer but operate independently) based on six key factors (in alphabetical order): compensation; firm leadership and culture; operational support; products and marketing; professional development; and technology.
The study is based on responses from 4,183 employee and independent financial advisors and was fielded from December 2022 through April 2023.
For more information about the U.S. Financial Advisor Satisfaction Study, visit https://www.jdpower.com/business/resource/us-financial-advisor-satisfaction-study.
SEE ALSO:
• Winning Scores Decline, But Top Broker-Dealers Hold Spots in Advisor Satisfaction Survey
• Self-Directed Investors Don’t Understand Digital Advice: J.D. Power
• Envestnet Elevate Summit 2023: Succession Planning in Advisory Firms
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.
