The giant wealth managers marketing their comprehensive financial advice are actually providing that service to just 14% of their clients, according to J.D. Power’s annual study.
More than 4,000 investors who work with a financial advisor spoke with the research firm as part of its 2022 U.S. Full-Service Investor Satisfaction Study, which acts as a client report card for an industry that’s fueled by the recurring revenue of long-term advisory accounts and relationships. UBS, Vanguard, Charles Schwab and Northwestern Mutual finished at the top of this year’s rankings of 18 firms, while TIAA, Prudential and LPL Financial came in at the bottom.
Regardless of the specific positions on the list, though, each of the wealth managers can find areas of improvement in full-bore advice, according to J.D. Power. Only about half (51%) of the clients said they strongly agreed that their advisor provides comprehensive advice that meets all of their wealth management needs. However, just 26% of those clients receive a level of service that J.D. Power defined as comprehensive based on criteria including a documented financial plan, recommendations in a client’s best interest, understanding of their goals and frequent communication. Across the survey, 86% of clients aren’t receiving that level of service.
“When we actually look at experiences and perceptions that they have, they’re not really getting comprehensive advice as we understand it,” said Mike Foy, J.D. Power’s senior director of wealth intelligence. “It really points to a big opportunity for the industry to deliver on what I think its implicit or explicit promise is, in terms of providing value to investors.”
The findings carry a direct impact on the firms’ business, from potential regulatory questions under the SEC’s Regulation Best Interest to client retention and growth. Among those currently getting the full-bore advice, 76% of the clients said they would definitely not switch firms in the next year and the group gave their wealth manager a net promoter score of 93. That means they feel a high degree of loyalty to the firm and they’re very likely to recommend it to a friend.
About half of new clients to the average advisory firm come from those referrals, according to industry consultant Gavin Spitzner of Wealth Consulting Partners. Their “satisfaction levels absolutely matter” but, as the survey shows, most clients “don’t know what ‘good’ looks like,” he said in an email.
“Client retention rates have been high and the bar has been low with the long-term bull market lifting all ships and masking poor client experiences and digital capabilities,” Spitzner said. “Firms that demonstrate what good actually looks like and feels like, from holistic, personalized advice to the marriage of great advisors and great technology, will not only retain their existing clients, but will generate more quality referrals and convert more clients — both advised and non-advised today — at the expense of those that are complacent.”
J.D. Power spoke with 4,396 investors between November and January to compile the firms’ satisfaction scores and rankings. Each of the investors said they are clients to a financial advisor or a team of advisors.
Only firms with at least 100 clients in the sample end up in the public rankings from the survey, which is in its 20th year. To get a “satisfaction index” for each wealth manager on a 1,000-point scale, J.D. Power used seven weighted factors: “trust; people; products and services; value for fees; ability to manage wealth how and when I want; problem resolution; and digital channels.”
For results from prior years, see our slideshows from 2021, 2020, 2019 and 2018. To see this year’s rankings, scroll down our slideshow.