Edward Jones,
LPL Financial Services and Charles Schwab & Co. rank at the top of U.S. brokerage firms in terms of overall client satisfaction, according to the results of an annual survey by J.D. Power & Associates.
St. Louis-based Jones rose from second place, bumping last year's top firm,
Raymond James Financial of St. Petersburg, Fla., to fourth place. Boston-based LPL rose to second place from fourth, and San Francisco-based Schwab catapulted from ninth place to third.
Measured by what J.D. Power terms its overall investor satisfaction index, the top firms scored 784, 773 and 771 points, respectively, on a 1,000-point scale. The industry average was 731 points.
Wirehouses scored near or below average, with
UBS Financial Services dropping from third to sixth place with 750 points, Smith Barney up one place to seventh with 736 points, Morgan Stanley in ninth with 732, Wachovia Securities tied for tenth place with
Fidelity Investments at 721, and Merrill Lynch in thirteenth place, from fifth, at 707.
The chief driver of satisfaction, according to the study, is the financial adviser, comprising 30% of the total — an increase from 22% in 2008. In contrast, investment performance declined in importance — accounting for only 15% of overall satisfaction, compared with 24% in 2008.
“As investors become increasingly uneasy amid current market conditions, they're more often looking to their financial advisers for reassurance and guidance,” said David Lo, director of investment services at J.D. Power, of Westlake Village, Calif. “As investment performance tends to be a relative and subjective measure, it's more important that the financial adviser manages investors' expectations of investment performance.”
The study also found that improved communication by the financial adviser may increase investor satisfaction. In particular, proactively contacting investors to set or refresh a comprehensive financial plan, thoroughly explaining fees and providing clear explanations regarding the reasons for investment performance may have a substantial positive impact on satisfaction.
“Financial advisers need to address uncertainty and apprehension by proactively reaching out to their clients,” said Mr. Lo. “This year, 20% of investors said they haven't been contacted enough to review their investment performance, up from 15% in 2008. Interestingly, the average number of times investors have been contacted to review their investment performance has not changed from last year.”
Similar to movement in the S&P 500 Index, the survey found that 85% of full service investor portfolios have declined in value during the past 12 months, and among portfolios that have declined, 61% have lost more than 30% in value.
