J.D. Power & Associates Reports: Advisor/Investor Relationship Drives Full Service Investor Satisfaction

WESTLAKE VILLAGE, Calif., May 9, 2013 /PRNewswire/ -- As markets continue to rise, overall investor satisfaction with full service investment firms continues to increase for the second consecutive year, heavily influenced by the type of relationship that investors have with their advisor, according to the J.D. Power & Associates 2013 U.S. Full Service Investor Satisfaction Study^SM released today.

KEY FINDINGS

• Overall investor satisfaction with full service investment firms improves to 789, up 14 points from 2012.
• Investors prefer a collaborative relationship with their investment firm.
• Communication is crucial to investor satisfaction. The highest ratings come from investors contacted 12 or more times a year.

The study, now in its 11th 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. The study was fielded in January and February 2013 and is based on responses from more than 4,750 investors who make some or all of their investment decisions with an investment advisor.

Overall satisfaction has improved to 789 on a 1,000-point scale, up from 775 in 2012 and 772 in 2011.  Yet, in spite of a high correlation between investor satisfaction and actual market performance, satisfaction scores for some firms is lower than might be expected based on reported performance alone.

"Logically, an improvement in investment performance is going to result in an increase in investor satisfaction," said Craig Martin, director of investment services at J.D. Power & Associates. "However, not all firms achieve the same level of increase in satisfaction from this improvement. The study finds that there are two elements beyond investment performance separating firms with high satisfaction from those with low satisfaction: the person that investors credit for their investment performance and the relationship investors have with their advisor."

Firms with lower-than-expected satisfaction have the lowest proportions of investors who attribute investment performance to their own decisions rather than recommendations made by their advisor. These same firms also have a higher proportion of investors who defer their investment planning decisions to their advisor. This trend suggests that investors prefer advisor relationships in which they have an active role and there is a high degree of transparency.

Firms with higher satisfaction ensure that investors feel involved and to an extent responsible for their investment performance. Stronger relationships allow these firms to positively influence investor perceptions of success.

Communication Is Key to Improving Relationships
Outside of making suggestions and decisions that lead to better investment performance, a key component to firms building stronger relationships with their investors is through communication. In addition to updates on portfolio performance, investors appreciate other meaningful insights, such as tips on new investments to consider.

"Being absolutely transparent with investors about the performance of their portfolio, whether performance is good or bad, is absolutely critical for investment firms," said Martin. "Beyond that, investors want communication that is meaningful, not just checking in once a month, but also providing insights, such as stocks to watch, tips for tax savings—things that add value."  

Frequency and the right type of communication also play important roles in impacting investor satisfaction.

"In the 2013 study, the firms with the highest satisfaction scores contacted investors more than 12 times during the past year, while those with lower scores only contacted investors approximately six to eight times," said Martin. "However, firms should also understand how their investors prefer to be contacted. Some investors want regular updates via email, some prefer a phone call or an in-person conversation, while others prefer a combination of all three channels."

The study finds that communicating the right information and using the delivery channels investors prefer at the optimal frequency improves overall investor satisfaction, which is likely to yield clear financial benefits for investment firms.

When satisfaction with investment performance is high, investors are more likely to recommend their advisor and investment firm to others, and also more likely to increase the amount they have invested with the firm. Among highly satisfied investors who indicate their investments have increased, 71 percent say they "definitely will" recommend their primary firm, and they make an average of five recommendations. Among investors with lower levels of satisfaction who indicate an increase in investments, only 30 percent say they "definitely will" recommend, and they make an average of 2.5 recommendations. Further, investors with high levels of investment performance satisfaction indicate they plan to increase their investment amounts at more than double the rate of that among investors with lower levels of satisfaction.

Investment Firm Rankings
RBC Wealth Management ranks highest in overall investor satisfaction with a score of 820, and Fidelity Investments ranks second with a score of 810. Edward Jones, which ranked highest in 2012, ranks third in 2013 with a score of 808, compared with 803 in 2012.

Drive Higher Perceptions of Performance
A high level of communication alone is not enough to improve investor satisfaction. Advisors who achieve above-average investment performance satisfaction and who have a strong relationship with their investors share the following traits:

• They develop and/or review a financial plan that effectively incorporates risk and ensure this plan is in a tangible form that can be easily understood by the investor.
• They clearly communicate the reasons for investment performance and the firm's fee structure so investors fully understand the value provided for the fees paid.
• They strive for an equal partnership with investors and make them feel involved in decisions impacting the performance of their investments.
• They define the appropriate level and method of contact to meet the expectations of their investors.

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

About J.D. Power & Associates
Headquartered in Westlake Village, Calif., J.D. Power & Associates is a global marketing information services company providing performance improvement, social media and customer satisfaction insights and solutions. The company's quality and satisfaction measurements are based on responses from millions of consumers annually. For more information and ratings for cars, retail banking, credit cards, health insurance, cell phones, and more, please visit JDPower.com. J.D. Power & Associates is a business unit of McGraw Hill Financial.

About McGraw Hill Financial:
McGraw Hill Financial (NYSE:MHP), a financial intelligence company, is a leader in credit ratings, benchmarks and analytics for the global capital and commodity markets. Iconic brands include: Standard & Poor's Ratings Services, S&P Capital IQ, S&P Dow Jones Indices, Platts, CRISIL, J.D. Power & Associates, McGraw Hill Construction and Aviation Week. The Company has approximately 17,000 employees in 27 countries. Additional information is available at www.mhfi.com.

J.D. Power & Associates Media Relations Contacts:
Jeff Perlman; Brandware Public Relations; Woodland Hills, Calif.; (818) 598-1115; [email protected]
John Tews; Troy, Mich.; (248) 680-6218; [email protected]

No advertising or other promotional use can be made of the information in this release without the express prior written consent of J.D. Power @ Associates. www.jdpower.com/corporate.

SOURCE J.D. Power and Associates