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Satisfaction (not) Guaranteed

JD Power just released the results of its 2017 U.S. Full Service Investor Satisfaction Study. The survey measures the satisfaction levels of 6,500 investors who access services through advisors. Rankings cover six areas including product offerings, fees, website, advisor quality, account info and performance.

As the table below shows, perennial winners USAA (although not technically eligible to be formally awarded first place, it still ranks the highest), Schwab and Fidelity again captured the top three spots. Why so much success? These firms, we believe, have an important structural advantage when considered in the advisor directed category. Although the three all employ financial advisors, all are built on a direct market chassis, highly dependent on centralized (online primarily) distribution of functionality, information and data. This means that supporting their advisors is a prebuilt direct connection between firm and client. This connection insures consistency and reliability in line with the company’s brand promise across client touchpoints even when the client is working through an advisor. The advisor becomes simply an extension of the firm, another channel option to access the firm’s offering.

The contrast between this model and that of most broker dealers is stark. For traditional broker-dealers, the client’s primary relationship is with an individual broker, or brokerage team, not the firm. The advisor/broker controls the client’s relationship with the firm, service level and the products they use. Client satisfaction is, as a result, primarily a function of the quality of the brokerage force. Inconsistency in broker quality lowers satisfaction scores for the firm overall.

Direct firms also generally have an advantage in the quality and breadth of client communications and electronic interactions. Broker-dealers typically allow their brokers to distribute communications and in many cases to personalize or private label them. This model compromises consistency in clients experience and further decouples the content and messaging of the communications from the firm.

Note that among firms using the more traditional broker-dealer model, Edward Jones had the highest investor satisfaction rates. While clearly not a direct marketer, it could be argued that Edward Jones advisors are the most closely aligned with the parent brand and approach as any on the street. And that their service level as predefined by the parent company is more consistently delivered across the brokerage force.