As financial advisors coach clients through market volatility and inflation, they’re looking more critically than ever at their current brokerage firms, according to a new survey.
Registered representatives at nine out of 13 wealth managers ranked in J.D. Power’s annual advisor satisfaction study received lower scores compared to a year ago. At least 15% of wirehouse advisors and 7% of independent planners said they’re considering leaving their firm in the next one to two years.
They’ll have many choices for landing spots, according to the study released July 6. Commonwealth Financial Network and Edward Jones, respectively, topped their rivals in the independent and employee channels, with Stifel and Raymond James’ two brokerages grabbing the other three spots for the top five grades in the industry.
Each year over roughly the past decade, Commonwealth and Edward Jones have won the highest scores in the U.S. Financial Advisor Satisfaction Study. That span includes periods of wildly-swinging equity values and the onset of the COVID-19 pandemic two years ago. With an average advisor age of 57 across the industry this year, wealth managers “need to actively create advisor brand evangelists who will attract the next generation of talent,” said Mike Foy, J.D. Power’s senior director of wealth and lending intelligence.
“Right now, many firms are missing the mark on developing that level of advisor engagement, but there are some clear drivers that need to be in place for it to happen,” he said in a statement. “Firms that are making the right investments in technology, effective marketing support, competitive products and services and have a strong top-down corporate culture are significantly outperforming the competition when it comes to advisor satisfaction and advocacy.”
The research consulting firm’s survey of more than 3,000 advisors in the first five months of 2022 offers actionable takeaways. The implications are important as wirehouses and other brokerages whose advisors are W-2 employees of the companies seek to retain their most productive teams and prevent bolts to independent channels. With the latter gaining market share each year, recruiting is increasingly difficult.
On a 1,000-point scale, employee advisors with a tenure of at least two decades at their current firm gave the companies an average grade of 658, compared to 689 among those in 10- to 20-year stints and 741 for advisors in their first decade. That contrasts with advisors at independent brokerages, where satisfaction scores were roughly the same across all experience levels, according to J.D. Power.
Advisors working in an office on a full-time basis gave their firms the highest ratings at 791, while those spending most of their days at the office had the second highest satisfaction score at 778. Nearly one in four, or 24%, said they prefer to be in the office full-time. Another 38% said they prefer to be in their office most of the time.
The top-ranked firm in the survey is operating with an eye toward flexibility and succession. Commonwealth unveiled its Entrepreneurial Capital program last month to offer loans and equity-based financing to advisors as an alternative to external capital from private equity firms, investment banks and RIA consolidators, said Matt Chisholm, Commonwealth’s senior vice president of RIA services. He joined the Waltham, Massachusetts-based firm in 2020 from Fidelity Clearing & Custody Solutions, where he oversaw practice management and consulting.
“Certainly our advisors are getting a lot of calls,” Chisholm said. “We’re now in a position to not just meet but probably to improve their end outcomes.”
Commonwealth received top billing in the J.D. Power study despite sustaining a double-digit drop in advisor satisfaction during the declining equity markets of recent months. LPL Financial, Cetera Financial Group and Advisor Group saw the largest declines in their scores from a year ago, while ratings of the Ameriprise employee channel, Morgan Stanley and Stifel rose the most. Like Raymond James, Ameriprise operates in both channels of the industry with some advisors who work as independent contractors of the firm and others who are W-2 employees.
For results of J.D. Power’s latest advisor satisfaction survey, scroll down our slideshow. To see last year’s rankings, click here. For results of the firm’s annual full-service client satisfaction study, click here.
Note: The J.D. Power U.S. Financial Advisor Satisfaction Study measures the responses of 3,039 participants among wealth managers in the employee and independent channels. For each firm with at least 100 participating advisors, the research consultant creates a satisfaction index score on a 1,000-point scale based on six factors: “compensation; leadership and culture; operational support; products and marketing; professional development; and technology.”