As markets rallied last year, investor satisfaction with investment firms grew, according to a new study. But all is not well with millennials.
J.D. Power, a Troy, Michigan–based research and data analytics firm, found that last year, investor satisfaction with full-service investment firms grew 8 points year-over-year on a 1,000-point scale to 735, after falling 17 points the prior year.
The company polled 9,951 investors who work directly with a dedicated financial advisor or team of advisors between January 2023 and January 2024. The survey — which is in its 22nd year — analyzed overall investor satisfaction with full-service investment firms based on seven factors: trust, people, products and services, value for fees, ability to manage wealth how and when the client wants, problem resolution, and digital channels.
However, despite the increase in satisfaction, millennials, an increasingly important wealth demographic, seem to be a weak point for advisors. According to the survey, 36 percent of millennials with a least $1 million in investable assets said “they ‘probably will’ or ‘definitely will’ switch firms in the next year.”
Investor satisfaction that is tied to market performance is a systemic problem in wealth management.
Markets are inherently volatile, and downturns, despite being potentially good investment opportunities, can also create dissatisfaction with an advisor’s performance.
“It is conventional wisdom that investor satisfaction tracks closely with stock market performance, but for advisors who want to build long-term, sustainable relationships that can weather good markets and bad, they will need to build a deeper level of engagement with clients,” Craig Martin, executive managing director and global head of wealth and lending intelligence at J.D. Power, said in a statement. “This is especially true among the younger segment of investors who show lower levels of client loyalty than investors in other generational groups. Advisors will need to adjust their approach to meaningfully connect with younger investors or risk a major outflow of assets in coming years.”
According to Cerulli Associates, a wealth and asset management research and consulting firm, millennials are expected to inherit $27.4 trillion over the next 25 years, but their loyalty is in question.
In addition to the more than a third who are likely to switch firms in the next year, 70 percent of millennials surveyed said they have a secondary investment firm. “This number is significantly lower among older affluent cohorts,” J.D. Power said.
However, technology might be a potential solution for advisor satisfaction woes.
According to the report, “advisors who take the time to help clients understand and engage with digital channels are consistently driving higher levels of investor satisfaction,” while “advisors who fail to clearly explain digital options are perceived more negatively and get half the number of referrals as their more digitally supportive peers.”
U.S. Bank was the highest-ranked advisor in the survey, with a score of 761. Edward Jones was second, with a score of 749, and Vanguard was third, with a score of 748.
