Scottrade edges out Schwab among do-it-yourselfers in J.D. Power ranks

Overall satisfaction slips as investors suffer from information overload

Jun 17, 2013 @ 1:37 pm

By Dan Jamieson

Do-it-yourself online investors may be succumbing to a bit of information overload from discount brokers.

In the latest J.D. Power & Associates ranking of discounters, released today, overall satisfaction averaged 752 on a 1,000-point scale among self-directed investors, down from 768 in 2012.

The study measured investor satisfaction with the interaction, account information, fees, account offerings, information resources and problem resolution they experience from their brokerage firms.

The drop in satisfaction comes as “investment firms struggle to find the right method and frequency of communicating with investors,” J.D. Power said in a news release.

Scottrade Inc. edged out Charles Schwab & Co. Inc. as the highest-ranked firm, scoring 810 this year versus 798 last year. Schwab scored 797, down from 801. The Vanguard Group Inc. was right behind Schwab at 795.

"There's not a massive gap" among the top firms, said Craig Martin, director of the wealth management practice at J.D. Power.

Scottrade did better on its fees-and-commissions ranking as well as the interaction it offers on its website and through mobile devices, he said.

Like last year, the Merrill Edge and Wells Trade online platforms came in last out of 11 firms, with scores of 730 and 722, respectively.

Both Merrill Lynch Pierce Fenner & Smith Inc. and Wells Fargo Advisors LLC, which support the platforms, could be more focused on the full service side, Mr. Martin said. But both firms have seen improved results from J.D. Power's survey of full-service firms, he added, “so they're not standing still.”

Top-rated discounters have a more personalized approach and are better at targeting their offerings to specific types of investors, Mr. Martin added. “That includes explaining fees and commissions so [investors] know what they're paying for, and making sure they understand what clients are looking for.”

J.D. Power said online brokers overall are offering more tools and information, but the additional capabilities “may actually make it more difficult to access the functions investors are seeking if a website is not easy to navigate and communication is not clear.”

Fewer investors this year said they had been contacted by their firm two or more times in the last year, or “completely” understood the fees they paid. Use or awareness of at least one financial planning tool also dropped.

Mr. Martin said the average self-directed investor, who may not trade much, seems confused by the wealth of trading tools and other services the discount firms provide for their most active traders.

"The top trading tier is very satisfied," he said. But "while making trades is one part of it, total assets is another component" discounters have to focus on.

The study was conducted in January and February, and was based on responses from 3,619 investors who make all of their own investment decisions.

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