Investors experiencing service issues at online brokerages: J.D. Power study

Canadian online brokerages are struggling to keep up with client expectations as do-it-yourself investors have flocked to online investment platforms, according to a study from J.D. Power.

Almost twice as many clients experienced service issues over the last year compared to the previous year, according to the annual study published Thursday.

Increased business at self-directed brokerages “has come with challenges to the stability of platforms as well as the capacity of firms to quickly respond to and resolve client problems,” said Michael Foy, senior director of wealth intelligence at J.D. Power, in a release.

The J.D. Power 2021 Canada Self-Directed Investor Satisfaction Study measured self-directed investors’ satisfaction with their investment firm in seven categories on a 1,000-point scale. National Bank Direct Brokerage ranked highest with a score of 654. Questrade (645) ranked second and RBC Direct Investing (615) ranked third.

Not only did an influx of new DIY investors become online brokerage clients following the market correction in spring 2020, but 40% of existing investors increased their investments as well as trading activity, the study found.

However, with the increased investment activity, 24% of self-directed investors said they had at least one problem with their firm during the past 12 months — an increase from 14% in the 2020 report, and more than double that of U.S. DIY investors (11%) during the same period.

In the study, one-fifth (20%) of investors who experienced a problem with their investment firm said they are considering switching providers, which is more than three times the number of investors without issues (6%) who said they plan to switch.

“Firms must raise the bar on the experience they deliver” or risk losing clients to competitors, Foy said.

The study found that call wait times was an issue for the 47% of self-directed investors who engage with their firms by phone, particularly younger investors. Only 16% of millennials and younger investors reported wait times of one minute or less compared to 28% of boomers and older investors, reflecting a lower tolerance among younger investors for waiting, the study suggested.

DIY investors gave an average satisfaction score of 644 to their firms’ websites, an average score of 604 to their mobile apps, and 587 to the phone channel. While the chat channel received a 627 score, the highest among the communication channels, it was also relatively under-utilized, with only 13% of clients engaging with the firm via chat.

The J.D. Power study, redesigned for 2021, measures self-directed investors’ satisfaction with their investment firm based on performance in seven factors (in order of importance): trust; digital channels; ability to manage wealth how and when I want; products and services; value for fees; people; and problem resolution.

This year’s study was based on responses from 2,011 investors who make all their investment decisions without the counsel of a full-service dedicated financial advisor. The study was fielded from December 2020 through February 2021.

Rudy Mezzetta

Rudy is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on tax, estate planning, industry news and more since 2005. Reach him at rudy@newcom.ca.