USAA, Edward Jones, Ameriprise ranked most understandable by clients

Survey shows clients want to comprehend their advisers as much as they want reasonable fees

Feb 13, 2018 @ 6:00 am

By Ryan W. Neal

Investors don't just want low prices, they want financial services they can understand.

A new study by Hearts & Wallets, which asked more than 5,000 households to rate their top two financial providers on service and pricing, found a firm that "explains things in understandable terms" and has "clear and understandable fees" is more important than having low fees. And it's equally as important as charging "reasonable fees," the study said.

People are beginning to recognize that they must have extra if they want better service, said Laura Varas, Hearts & Wallets founder and chief executive.

"A firm that gives great financial planning advice, or has people who answer the phone instantly instead of putting you through a phone prompt hell – they cost more," Ms. Varas said. "It might be worth it to pay extra for someone who explains it better."

About 36% of consumers named personal financial advice as an important benefit of working with a firm, coming in second to the obvious answer of "making money." Ms. Varas said the results should encourage financial advisers to be confident about their value proposition in the face of low-cost digital advice startups.

(More: Three incorrect assumptions all robo-advisers make about clients)

"The market of people willing to pay for nice things is smaller … but there is a market," she said. "There are consumers who want to buy the deepest and broadest advice and want the most hand-holding."

Retail investors ranked USAA, Edward Jones and Ameriprise Financial as being the top performers when it comes to explaining finance in understandable terms. Scottrade, which was bought by TD Ameritrade last year, was recognized for having clear and understandable fees.

(More: With TD Ameritrade about to acquire Scottrade, Tom Bradley is out)

When it comes to pricing, Ms. Varas said the data indicates a major shift in terms of how consumers are paying for financial services. There was a dramatic decrease in the number of survey respondents who think they pay through products or on basis points, and a dramatic increase in those who think they are paying flat fees.

Ms. Varas said it's the biggest change she's seen in her career.

Though many firms still charge clients a percentage of their assets under management, it's clear that investors are talking about, and want to pay, a flat fee for advice.

"[Investors] don't believe it costs much more to manage $1 million portfolio than a $2 million portfolio," she said. "They are willing to be explained why it costs more, but don't believe it costs double."

The data also indicate that understanding how a firm makes money is the number one driver of trust among clients — not low prices.

(More: Wells Fargo requires advisers to use level fees for new 401(k) business)

Morgan Stanley was named "most improved" in several categories — explaining things in understandable terms, understanding clients and sharing their value, making clients money, having a well-trained staff, online tools and research, and offering personal financial advice.

Ms. Varas said this indicates that even at the largest firms, it's possible to make changes and improve consumer opinion.


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