Findings from the J.D. Power 2019 U.S. Full Service Investor Satisfaction Study provide compelling data about investors’ increasingly negative perceptions of their investment performance, which affects their future investment intentions and, ultimately, firms’ overall performance, according to a J.D. Power news release. The study was conducted in Dec. 2018 when market volatility was at a four-year high and many investors were experiencing the worst returns since the financial crisis. Not surprisingly, investor satisfaction suffered, but amidst that struggle, important insights about what separates the best advisors in any market have emerged.
Following are some of the key findings of the 2019 study:
Increased investor flight risk: Among investors whose advisor explained their 2018 investment performance, more than half (53%) indicate they “definitely will” recommend their advisor vs. 24% among those who did not receive an explanation of their performance. Additionally, while only 10% of the former group “definitely will” or “probably will” consider switching firms over the next year, that percentage doubles to 20% among the latter group.
Performance declines affect high net worth satisfaction and loyalty: Since 2018, overall satisfaction with investment performance has declined 46 points (on a 1,000-point scale), but among high net worth investors (those with $1 million or more in investable assets), the decline is 66 points. Wealthier investors not only have more to lose when markets decline, but also this group tends to be older, so they have a shorter time horizon for when the assets are needed, which can amplify the perceived effect.
Boomers have increasing concerns about financial well-being: Three-fourths (75%) of Boomers and Pre-Boomers indicate they are the same or worse off than last year, up from 58% in 2018. This change in sentiment can affect the bottom line, as the percentage of investors who “definitely will” recommend their primary firm drops from 64% among those who say they’re “better off” to 49% among those who say they’re “about the same” and 41% among those who say they’re “worse off.”
The missing digital link: Given the critical importance of effective communication across channels, it is vital that firms upgrade investors’ perceptions of their mobile capabilities. Mobile continues to be the channel with the lowest satisfaction among full-service investors across all generational segments, trailing both online/web and phone, and is especially low among Boomers (671) when compared with Gen X (787) and Millennials (853).