Aging Investors Unprepared to Transfer Wealth to Younger Generation, Advisors Need to Drive Process

WESTLAKE VILLAGE, Calif., April 9, 2015 /PRNewswire/ -- With an aging full service investor demographic and an anticipated enormous generational transfer of wealth on the horizon, investment firms are not asking the right questions of their clients and may be at risk of losing assets if they fail to establish relationships now with the next generation, according to the J.D. Power 2015 U.S. Full Service Investor Satisfaction Study^SM released today.

The study, now in its 13th year, measures overall investor satisfaction with full service investment firms in seven factors (in order of importance): investment advisor; investment performance; account information; account offerings; commissions and fees; website; and problem resolution. Overall investor satisfaction remains unchanged at 807 (on a 1,000-point scale) from 2014.

With a median age of 61 years among full service investors, investment advisors and firms are missing a tremendous opportunity to position themselves for the anticipated generational transfer of wealth over the next few decades. Despite 71 percent of investors who have named next-gen beneficiaries indicating a willingness to discuss those needs with their advisor, only 42 percent have actually been asked by their advisor to have such a conversation. When advisors ask about the needs of the next generation, not only does the number of contacts with beneficiaries and potentially new clients increase, but overall satisfaction is also higher among investors who are asked than among those who are not asked (854 vs. 793, respectively).  

"Talking to clients about their beneficiaries may feel awkward to many advisors, but most investors want their wealth to benefit the next generation," said Mike Foy, director of the wealth management practice at J.D. Power. "Many times, investors themselves struggle in money-related conversations with their kids, and an advisor is in a unique position to be a bridge between generations. Firms that can effectively train and support their advisors in this regard have a real opportunity to differentiate their services."     

KEY FINDINGS

• There is only a 5 point gap in satisfaction between the highest-ranked investment firms and the industry average (812 vs. 807, respectively), suggesting there is a limited perception of differentiation with the client experience among industry firms.
• Similar to their lack of preparation for intergenerational wealth transfers, firms are also not proactively preparing for intragenerational wealth transfer events. Nearly one-fourth (23%) of investors say their advisor never interacts with their spouse or partner, missing a tremendous opportunity to retain the household wealth over the long term.
• Among investors who have named next-gen beneficiaries, 33 percent of the beneficiaries have an account or product with that same firm. The proportion of beneficiary accounts increases by 24 percentage points when advisors ask their investors about beneficiary needs.
• Women investors are becoming an increasingly important segment of the market, but merely working with a female advisor does not improve their overall satisfaction. According to the study, there's a greater impact on satisfaction when firms recruit, train and retain advisors of either gender with the skills needed to build trust-based collaborative relationships. Satisfaction is more highly impacted among women investors who say they "work with their advisor as a team" than among men who say the same (+58 vs. +31, respectively).
• There are generational differences in terms of the trust investors place in their advisors. Slightly more than two-thirds (67%) of Pre-Boomers (born before 1946) indicate their advisor makes recommendations in their best interest, while just 40 percent of Gen Y (1977-1994) and Gen Z (1995-2004) say the same.¹
• Higher satisfaction translates into significant increases in advocacy, loyalty and share of investment wallet for firms. Among firms ranking above the industry average, 48 percent of investors say they "definitely will" recommend their firm vs. 37 percent of investors with firms ranking below average. With respect to loyalty, 46 percent of investors of firms that perform above industry average say they "definitely will not" switch firms, compared with 38 percent of investors with firms that perform below average. While there is only a 2 percentage point gap in share of wallet between above- and below-average firms (86% vs, 84%, respectively), it can translate into a significant increase in a firm's assets under management.  

Study Rankings:
Edward Jones and Fidelity Investments rank highest in a tie in overall investor satisfaction with a score of 812 each. Edward Jones performs particularly well in the investment advisor and investment performance factors, and Fidelity Investments performs particularly well in account information and account offerings. Charles Schwab & Co., Inc. and Wells Fargo Advisors rank third in a tie with a score of 810 each. Raymond James follows scoring 809.

The 2015 U.S. Full Service Investor Satisfaction Study was fielded in January and February 2015 and is based on responses from more than 5,300 investors who make some or all of their investment decisions with an investment advisor.

Power Circle Ratings Legend
5 – Among the best
4 – Better than most
3 – About average
2 – The rest

Media Relations Contacts
Jeff Perlman; Brandware Public Relations; Woodland Hills, Calif.; 818-317-3070;
[email protected]
John Tews; J.D. Power; Troy, Mich.; 248-680-6218; [email protected]

About J.D. Power and Advertising/Promotional Rules www.jdpower.com/about-us/press-release-info

About McGraw Hill Financial www.mhfi.com 

¹ Gen Y and Gen Z are combined for purposes of analysis, as survey respondents are required to be at least 18 years old to participate in the study.

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SOURCE J.D. Power

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