Wirehouses fall flat on adviser satisfaction: J.D. Power

Independent advisory firms are outpacing wirehouses when it comes to financial advisers’ satisfaction, according to research by J.D. Power released Wednesday.

Wirehouse advisers have experienced negative effects from the pandemic at double the rate of non-wirehouse and independent advisers, according to the study based on responses from 3,029 employee and independent financial advisers from January through April.

Despite payout rates and branding campaigns that suggest higher levels of support for advisers, wirehouses have fallen short of adviser expectations during the pandemic, with 34% of advisers reporting reduced levels of support from the home office and 29% citing disruption of business services, according to the study.

The most significant pain points are technology and operations support. Just 35% of dissatisfied advisers say their firm’s technology offerings have improved in the past year and only 12% have had problem-free experiences with their firm during the past year.

Morgan Stanley is an exception as the only wirehouse that improved its adviser satisfaction from 2020.

J.D. Power also found that dissatisfied advisers are three times more likely to switch firms, which is costly. The average annual production of defecting advisers is nearly $800,000 per year, and 63% of investors indicate they would likely leave their firm to follow their adviser if the adviser left the firm.

The study comes on the heels of major wealth management firms attempting to restart firm culture post-pandemic. Some financial institutions have a hard-line approach to remote work, making flexible work policies the new tool that will offer a competitive edge in recruiting and retaining staff.

The study measures satisfaction among both employee advisers, those who are employed by an investment services firm, and independent advisers, those who are affiliated with a broker-dealer but operate independently, on a 1,000-point scale based on: compensation; leadership and culture; operational support; products and marketing; professional development; and technology.

Among employee advisers, Edward Jones ranks highest in overall satisfaction with a score of 890. Raymond James & Associates (864) ranks second, Stifel (857) ranks third, and Ameriprise (789) ranks fourth. Among wirehouses, Morgan Stanley (757) ranks fifth followed by Merrill Lynch (698), UBS (627) and Wells Fargo Advisors (577).

Among independent advisers, Commonwealth Financial Network ranks highest in overall satisfaction with a score of 936. Raymond James Financial Services (853) ranks second and Cambridge Associates (842) ranks third followed by Northwestern Mutual (828), Ameriprise (827) and LPL Financial (817).

“Adviser satisfaction is directly linked to retention and brand advocacy, so firms that want to get the most out of their advisers need to invest in providing them with the best tools and support to do their jobs effectively under all circumstances,” said Mike Foy, senior director of wealth and lending intelligence at J.D. Power. “This year has been especially challenging, and this study identifies some firms that clearly did a better job than others in meeting those challenges.”