Are you a negativist or a positivist?
Regardless of your nature, the results of the latest J.D. Power and Associates adviser satisfaction study, which were released last week, can confirm a hunch I have.
The firms that scored highest in adviser satisfaction — Edward Jones on the employee side and Commonwealth Financial Network among independents — earned their top spots because they did best on the attributes J.D. Power measures: firm performance, compensation, contact, people, job duties, work environment, product/service offerings to clients, technology and adviser support.
Surprisingly perhaps, compensation contributes just 13% to adviser satisfaction on the employee side and 12% on the independent side. Firm performance weighs in at 16% among employee advisers and 15% among independents, and services and support at 8% and 10%, respectively.
Underlying all the specific factors, however, is one overriding force that I think actually shapes satisfaction most: corporate culture. And that's where positivism and negativism come in.
If you look on the bright side, companies that have a strong corporate culture — Starbucks, for example — drive satisfaction by motivating employees to do their best while giving customers a sense that they're dealing with a unique and extraordinary provider.
If you're a cynic, though, a powerful corporate culture can come off as a sign of Big Brother management engaging in brainwashing. Here's the test: If you find it ridiculous to call the guy who serves coffee at Starbucks a barista, or to ask for a grande when you want an 8 oz. cup, you're probably in the cynical camp.
As you can see from the comments on our story last week some advisers view Edward Jones and its corporate culture through a cynical lens.
While a positivist would say that the company is pleasantly Midwestern in its small-town approach to business, with one-person offices sprinkled through the heartland offering basic investment advice to Middle America, a negativist would say the company relentlessly peddles its favorite mutual funds to unsophisticated buyers.
If you're a positivist, therefore, adviser success and satisfaction at Edward Jones depends on buying into the firm's wholesome small-town culture. If you're a cynic, it's about drinking the firm's Kool-Aid.
At Commonwealth, a different, equally strong culture prevails. Founder Joe Deitch has shaped a high-touch, high-tech way of doing things that is distinct from other independent firms.
I remember going to one Commonwealth national meeting several years ago, my first encounter with the firm, and came away asking, “Can all this kumbaya stuff be real?” I'm no corporate culture auditor, but I've come to believe it is.
Right below Commonwealth in satisfaction on the indie side is Raymond James Financial Inc. (which ranks No. 2 on the employee side of the fence as well). The Jamesian corporate culture is still very much a product of Tom James, who only recently turned over the reins of power.
Firms that rank below average on the J.D. Power adviser satisfaction scale have deficient corporate cultures, in my opinion.
The wirehouses, which rank low on adviser satisfaction on the employee side, are virtually indistinguishable big-company bureaucracies. Where they used to have the prestige of being part of Wall Street and powerful, prestigious investment banks, the golden aura of high finance is now considerably dimmer and tarnished. And aside from James Gorman and Jamie Dimon, are there any big-firm leaders who stand out?
Because they are smaller, low-ranking independent firms may be more nimble than the giants, but there's not much that distinguishes one from another there, either. If payouts are comparable and the public doesn't know or care about the company name, inertia may be all that ties advisers to culture-deficient small firms.
A strong corporate culture is hard to create. Usually, a passionate leader is the driver. But since the age of larger-than-life personalities in the securities/advisory business seems to have passed, and since corporate managers tend not to inspire passion, my money is on there being fewer strong corporate cultures in the advisory business in the future.
In terms of adviser satisfaction, maybe a little Kool-Aid is better than no Kool-Aid at all.