Consumer Reports: Should brokerage clients be as content as they are?

While Consumer Reports’ online readers say they are “very satisfied” with nearly all of the nation’s 13 major brokerages, undercover researchers found questionable sales practices at some of the firms.
In a Consumer Reports field test in which staff members went to brokerage offices in New York and Washington, one “empty nester” was steered towards a balanced, managed set of funds after his first visit to a JP Morgan Chase office. No other investment options were reviewed or compared, according to Consumer Reports’ February 2012 issue, which hit stands Jan. 3.
Another staff member, a woman in her mid-50s, was directed towards an annuity product even though the Citibank adviser knew little about her, the magazine reports.
Officials from Citibank and JP Morgan Chase spokeswoman did not provide comment by press time.
“A variable annuity has a number of tax- and investment-related features that would demand extensive analysis before a recommendation is made,” said David Yeske, a financial adviser who served as a judge on the magazine’s project.
Another tester, a 60-year-old widower planning to retire in a year or two with about $1 million in investible assets and a generous pension, was advised by a number of firms to invest 50% of his funds in bonds and cash.
The judges felt this was too conservative, given the inflation he could face over a long period in retirement. Mr. Yeske said the investor should have a minimum of 70% of his assets in equities, according to the magazine.
USAA Brokerage Services was the top-ranked firm in terms of customer satisfaction by the 7,327 ConsumerReports.org subscribers who answered surveys. Scottrade Inc. and Vanguard Brokerage Services tied with the second highest scores.

»Click here to see how consumers rated the discount brokerages. »

Morgan Stanley Smith Barney LLC scored the lowest among the 13 firms, all of which were ranked on customer service, financial advice, website usability and phone service. Morgan Stanley, WellsTrade (Wells Fargo & Co.) and Merrill Edge/Bank of America were the only firms that scored under the 80-point cutoff that signified customers were “very satisfied,” instead this trio ranked in the “fairly well satisfied” category.

Related Topics: Wealth Management