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Investors Who Faithfully Seek Guidance From an Advisor are Considerably More Satisfied With Their Full Service Investment Firm Than Self-Directed Investors
Edward Jones Ranks Highest in Investor Satisfaction for a Third Consecutive Year
Overall satisfaction with the firm and investment portfolio is considerably higher among investors who regularly seek counsel from their advisor, and the percentage of investment decisions made under the guidance of a financial advisor has increased since the 2006 study, according to the J.D. Power and Associates 2007 Full Service Investor Satisfaction Study(SM).
Now in its fifth year, the study measures overall investor satisfaction with Full Service investment firms based on six factors (in order of importance): financial advisor/broker (24%); account setup/account offerings (20%); investment performance (19%); commissions and fees (15%); account statements (12%); and convenience (11%).
The study finds that, despite the increased availability of tools for self-directed investors, the percentage of investment decisions made under the guidance of a financial advisor has increased to 59 percent in 2007 -- up from 53 percent in 2006. Satisfaction with the firm, financial advisor and the performance of the investment portfolio is, on average, 90 index points (on a 1,000-point scale) higher among investors who regularly seek counsel from their advisor when compared with investors who consider themselves entirely self-directed.
"First and foremost, it is absolutely critical for investment firms to have a clear understanding of the personal investment style of their customers, as this will surely help firms in meeting investor expectations and catering to their specific needs," said David Lo, director of investment services at J.D. Power and Associates. "Enhancing the one-on-one relationship between the financial advisor and the investor who seeks advice, while at the same time ensuring a seamless online experience for self-directed investors, can lead to an improvement in satisfaction across a firm's customer base. This improvement can generate a multitude of positive results, including increased customer loyalty, a significantly higher number of recommendations and a boost in assets."
Turning satisfied investors into highly committed customers can lead to substantial cost-saving and revenue-generating benefits, as customers with high commitment levels use more of the services offered and place more of their liquid assets with their primary investment firm. Additionally, highly committed customers are significantly less likely to switch firms and are more likely to recommend their firm's products and services. According to the study, 37 percent of investors consider themselves highly committed to their investment firm, while 52 percent describe themselves as having medium commitment.
"The benefits of moving an investor from medium to high commitment speak volumes when examining the return on investment," said Lo. "For a firm with one million customers, shifting a modest 5 percent of investors from moderate to high levels of commitment can result in an increase of more than $5 billion in assets under management."
With a score of 802 on a 1,000-point scale, Edward Jones ranks highest in customer satisfaction for a third consecutive year, performing particularly well in financial advisor/broker and investment performance. Edward Jones has also ranked highest for two consecutive years in the J.D. Power and Associates Canadian Full Service Investor Satisfaction Study(SM), which was released in June.
A.G. Edwards & Sons follows in the rankings with 782, performing well in all factors that drive overall satisfaction. Vanguard ranks third overall with 780 and performs well in account statements, and commissions and fees.
The study also finds that 39 percent of affluent investors -- defined as those who have at least $500,000 in liquid assets -- are highly satisfied and invest more than 90 percent of their assets with their primary investment firm. Conversely, 25 percent of affluent investors report low satisfaction levels, yet still invest more than 90 percent of their assets with their primary investment firm.
"Affluent investors with low satisfaction and high investment levels are most vulnerable to competitive firms, since 5 percent of these customers indicate that they intend to switch within the next 12 months," said Lo. "The primary driver in dissatisfaction among these vulnerable investors is a lack of contact from their investment advisor. Dedicating advisor time and attention can help enhance satisfaction and commitment among these extremely valuable, yet vulnerable investors."
The 2007 Full Service Investor Satisfaction Study is based on responses from nearly 5,000 investors who primarily invest with one of the 16 firms included in the study. The study was fielded from March to May 2007.

  Overall Customer Satisfaction Index Scores
  (Based on a 1,000-point scale)

  Edward Jones                                         802
  A.G. Edwards & Sons                                  782
  Vanguard                                             780
  Merrill Lynch                                        766
  Industry Average                                     762
  Wachovia Securities                                  761
  Smith Barney                                         753
  Ameriprise                                           751
  Charles Schwab & Co.                                 747
  Fidelity Investments                                 745
  UBS Financial Services                               745
  Morgan Stanley                                       738

  Included in the study but not ranked due to small sample size are:
  Citigroup, LPL Financial Services,Raymond James, RBC Dain Rauscher Inc.
  and TD Ameritrade.

For more information: http://www.jdpower.com/

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