Investment Ratings: How Does Yours Stack Up?

Physician's Money Digest, October 2007, Volume 14, Issue 10

Are you happy with your financial advisor? What about the performance of your investments? Are your account statements understandable? These are just some of the types of questions J.D. Power and Associates asked nearly 5000 investors in its 2007 Full Service Investor Satisfaction StudySM.

Firms were evaluated by their customers on six factors: financial advisor/ broker; account setup/account offerings; investment performance; commissions and fees; account statements; and customer service/convenience.

Their findings? If you're with Edward Jones, chances are you're happy. The firm ranked highest in customer satisfaction for the third year in a row. Yet heavy hitters such as Charles Schwab & Co, Fidelity Investments, USB Financial Services, and Morgan Stanley all fell below the industry average for overall customer satisfaction. (*See chart below for survey results.)

Among affluent investors, defined as those with at least $500,000 in liquid assets, the survey found that 39% are highly satisfied and invest more than 90% of their assets with their primary investment firm. Yet another 25% of affluent investors report low satisfaction levels—but still invest more than 90% of their assets with their primary firm. Not surprisingly, 5% of these investors intend to switch firms within the next year, according to David Lo, director of investment services at J.D. Power and Associates. He comments, "…The primary driver in dissatisfaction among these…investors is a lack of contact from their investment advisor."

With a score of 802 on a 1000-point scale, Edward Jones performed particularly well in financial advisor/broker ratings and investment performance ratings. A.G. Edwards followed second with 782, performing well in all factors that drive overall satisfaction. Vanguard ranks third overall with 780 and performed well in account statements and commissions and fees. Merrill Lynch ranked fourth with a score of 766. Firms coming in below the industry average (762) for overall satisfaction included Wachovia Securities (761), Smith Barney (753), and Ameriprise (751).

Interestingly, the study found that despite the proliferation of do-it-yourself investment tools, the number of investment decisions made under the guidance of a financial advisor increased since the previous year, from 53% in 2006 to 59% this year. Satisfaction with the firm, financial advisor, and portfolio performance is, on average, slightly higher among investors who regularly seek guidance compared with entirely self-directed investors. Overall, 37% of investors consider themselves highly committed to their investment firm, while 52% describe themselves as having medium commitment.

*Survey Results