Client satisfaction tumbles with markets: J.D. Power

Client satisfaction with financial advisors plunged alongside financial markets last year, according to a survey that attributes the drop to a lack of comprehensive advice.

Consumer insights firm J.D. Power released its annual study on Tuesday examining Canadian full-service investors’ satisfaction with financial advisors. Client satisfaction was down 17 points from a year ago.

The study — conducted between October and January, and based on responses from almost 5,000 advised Canadian investors — showed that only 6% Canadian investors received comprehensive advice. J.D. Power’s criteria for comprehensive advice included making recommendations in a client’s best interests, understanding a client’s lifestyle and goals, and having a financial plan.

More than half of those surveyed (57%) said they had a financial plan, but almost half of that group (43%) didn’t agree that their advisor’s recommendations were in their best interest. Almost four in 10 clients with a financial plan (38%) said they don’t think their advisor understands their financial goals and needs.

The percentage of Canadians receiving comprehensive advice was down by only one percentage point from last year (7%), but average satisfaction dropped to 652 from 669 on a scale of 1,000. The lower ratings occurred in a historically bad year for bond markets that also saw the S&P 500 fall more than 19% and the S&P/TSX Composite down almost 9%.

“Advisors don’t control the ups and downs of the market, but too often clients give them credit and blame for investment returns,” said Craig Martin, executive managing director and global head of wealth and lending intelligence at J.D. Power, in a release.

“This misguided view of the advisor’s role and value is a key risk for full-service firms in the future. If the main value provided is investment performance, investors may increasingly look for less costly ways to achieve similar returns.”

Younger clients are most likely to already have one foot out the door, according to the survey. One in five millennials said they would definitely or probably switch firms in the next 12 months, and one-third said they’re already working with a secondary investment firm.

Advisors providing transactional-style service will always be at risk of client churn, especially during down markets, Martin said. Comprehensive advice helps insulates advisors from negative returns and also leads to referrals, he added.

Edward Jones received the highest ranking this year with a score of 699, followed closely by last year’s top firm, Raymond James Ltd. (697). National Bank Financial (677) ranked third, followed by CI Assante Wealth Management (675) and Desjardins (670).

Full results can be found in the press release.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.