Investors’ overall satisfaction with financial firms has improved in Canada, finds a new study by J.D. Power.
The firm’s annual investor satisfaction study measures how confident clients are about their advisors and portfolios. To do so, it asks questions related to:
- advisors
- investment performance
- investors’ accounts
- advisors’ service offerings
- commissions and fees
- websites
- advisors’ conflict resolution skills
The 2013 study found the satisfaction levels of Canadian clients moved up to 737 points (based on a 1,000-point scale) from 720 points in 2012.
Further, the study finds investor contentment and actual market performance were highly correlated this year, with only 8% of investors indicating a decrease in portfolio performance in 2013, down from 29% in 2012.
“Investment performance certainly helps drive an increase in overall satisfaction, but the advisor still plays a key role,” says Craig Martin, director of investment services at J.D. Power.
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He adds, “Advisors need to ensure their clients understand the reasons for their portfolio performance, explain costs and fees, and manage expectations regarding risk. Relying too heavily on financial performance alone to drive investor satisfaction may have a number of pitfalls.”
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The study finds investors are looking for good financial returns along with reassurance they’re making the right decisions. Case in point: the satisfaction levels of clients who say their advisors clearly communicate the reasons for investment performance are 145 points higher on average.
What’s more, advisors need to discuss and effectively incorporate risk assessment as part of their annual reviews with investors. If they do, their clients’ satisfaction levels will be 109-points higher.
Read: Prioritize risk management
Communicating costs
It’s crucial that advisors explain their fees, says the study.
That’s because satisfaction levels rise an average of 99 points when clients understand where their money goes. Unfortunately, only 57% of investors say their planner discusses fees, a dip from the 63% indicated in 2012.
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If you’re wary about being transparent, remember happy clients will offer more referrals, says the study. It found many highly satisfied investors said they’d definitely recommend their firms (72%), while only small portions of underwhelmed clients said the same—29% of the “medium satisfaction” group and 4% of the “low satisfaction” group.
Further, almost a third (27%) of content clients planned to increase the amount invested with their primary firm over the next year, compared with only 17% of investors with lagging satisfaction levels.
So, here are some tips on how to best serve your book:
- Ensure clients’ financial plans incorporates easy-to-understand explanations of your risk assessment process
- Clearly communicate your firm’s fee structure and break down the charges client’s are paying
- Ask clients how often and in what ways they’d like to be contacted
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2013 firm rankings
The firms with the most satisfied clients are:
| Index Score | Power
Circle Rating |
||
| Edward Jones | 773 | 5 | |
| Dundee Wealth | 760 | 4 | |
| Raymond James Ltd. | 758 | 4 | |
| National Bank Financial | 747 | 4 | |
| BMO Nesbitt Burns | 744 | 4 | |
| CIBC Wood Gundy | 743 | 3 | |
| RBC Dominion Securities Inc. | 742 | 3 | |
| Assante Wealth Management | 739 | 3 | |
| ScotiaMcLeod | 738 | 3 | |
| TD Wealth Private Investment Advice | 737 | 3 | |
| Industry Average | 737 | 3 | |
| Desjardins Securities | 736 | 3 | |
| Investors Group Securities Inc. | 721 | 2 | |
| Manulife Securities | 711 | 2 | |
| Credential Securities | 709 | 2 | |
| *MD Physician Services | 770 | 5 | |
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