Advisor Intelligence

Good News for Advisors: DIY Investor Satisfaction Wanes

Over the last couple years, the big threat to the financial advisor industry has been the self-directed channel, which holds $3.68 trillion of the U.S. wealth management pie and hasenjoyed a compounded growth rate of 19 percent in the past two years, according to Cerulli Associates. And that growth has been at the expense of the wirehouses.

But a new J.D. Power report seems to suggest that the do-it-yourself model isn’t going to take over any time soon. Satisfaction with self-directed investment firms, such as E*Trade Financial and TD Ameritrade, has decreased from last year, with an overall satisfaction rating of 752 (on a 1,000-point scale), down from 768 in 2012, according to J.D. Power.

J.D. Power attributes the decline in satisfaction in large part to ineffective communication. For example, when website functions are difficult to locate, satisfaction falls by 72 points, and it also falls 62 points when the firms don’t communicate enough or via investors’ preferred methods. According to the study, the share of investment firms that have reached out to investors two or more times in the last year fell to 34 percent from 39 percent.

DIY investors’ understanding of their fee structure has also waned, with 35 percent saying they “completely” under the fee structure, compared to 39 percent in 2012.  

"Firms need to know how their investors would like to be notified--whether it occurs via email, phone or other means,” said Craig Martin, director of the wealth management practice at J.D. Power. “It's important to contact investors proactively and at the appropriate frequency based on investor preference." 

The results may provide advisors a clue for how to hold onto their own investor clients, and maybe even win back some market share.

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Diana Britton

Diana Britton is the Managing Editor of WealthManagement.com and REP. Magazine, covering asset management and independent broker/dealers from all angles. A native of Los Angeles, she now lives in...

Megan Leonhardt

Megan Leonhardt regularly pens articles around the wonderful world of the wirehouses, as well as pieces concentrated on regulatory updates, legal cases and compliance issues. A business journalist...
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