Despite growing investor satisfaction with Canadian full-service investment firms, financial advisors and their dealers are struggling to shed light on investment performance and fees, according to the 2015 Canadian Full Service Investor Satisfaction Study released by U.S.-based research firm J.D. Power and Associates on Thursday.

Study results show that investor satisfaction with their investment firms increased for the third year in row to an average of 764 points out of 1,000 — an increase of nine points from 2014. Furthermore, 11 of the 14 full-service investment firms included in the study saw an increase in their rankings.

Yet, despite this upward trend, investors say they remain confused about their investment performance and what their advisors charge. For example, 75% of investors say the don’t understand the fees and commissions they pay while 45% say their investment firms have not provided them with a summary of fees and commissions. As well, 33% of investors say they do not receive an explanation regarding their investment performance.

More importantly, firms and advisors who are not clear on these matters are likely to have less satisfied clients than those who meet investor expectations. For example, on average, investors’ satisfaction with their investment firms increased by 62 points when they are provided with a summary of fees and 87 points when an advisor explains fees directly to clients.

These statistics are of particular interest given the regulatory changes being implemented through the second phase of the client relationship model (a.k.a. CRM2), which are meant to bolster fee transparency, says Mike Foy, director of wealth management practice with J.D. Power in New York.

Specifically, clients will receive more detailed accounts statements and reports regarding their fees and investment performance over the next three years. These enhanced documents could lead to some difficult conversations for advisors who have not yet had an in-depth conversation with clients on these matters.

“There’s a legitimate fear that people might get some sticker shock. They might feel they’re paying more than they realized or they’re paying for things they didn’t realize,” says Foy. “And if a conversation with the advisor isn’t happening before that, then it’s going to be a much more negative experience [for investors] than if the advisor has already prepared them for this stuff and made sure that [investors understand] not only what they’re paying, but what they’re getting.”

Clients with Mississauga, Ont.-based Edward Jones are aware of what their advisors charge, according to the results of the study, and that knowledge has paid off for the firm. Edward Jones has received top marks in the survey for the third consecutive year, with a ranking of 804.

David Lane, managing principal of the Canadian-arm of Edward Jones, sees the firm’s strong showing in the survey as a testament to its branch teams and their work with clients. However, Lane doesn’t believe the firm can now rest on its laurels.

“We came in today knowing we’ve got to get better than what we were yesterday because our clients deserve it and demand it from us,” says Lane.

Besides beating the industry average, Edward Jones also scored highly in the study’s transparency benchmarks, as 73% of the firm’s clients say their advisor had explained the firm’s fee structures compared with an industry average of 57%. As well, 65% of Edward Jones’ clients said the firm had provided them with a summary of their fees and commissions compared with the industry average of 55%. Furthermore, 77% of Edward Jones clients reported that their advisor had indicated the reasons for their investment performance clearly compared with the industry average of 67%.

Edward Jones clients are given the choice as to how they pay for an advisor’s services whether it’s a transactional or fee-based model, says Lane, and explaining the details of both those options is a priority for advisors.

Says Lane: “We focus on the first day of training and in our regular communication about how important it is to our clients that they understand the fees.”

The study is based on responses gathered in May and June from 4,827 investors who use advice-based investment services from financial services institutions in Canada. Overall satisfaction with full-service investment firms is calculated based on the following seven factors, in order of importance: investment advisor; investment performance; account information; product offerings; commissions and fees; website; and problem resolution.

The full index ranking is as follows:

  • Edward Jones
  • TD Wealth Private Investment Advice
  • Raymond James Ltd.
  • HollisWealth Inc.
  • Assante Wealth Management (Canada) Ltd.
  • BMO Nesbitt Burns Inc.
  • RBC Dominion Securities Inc.
  • CIBC Wood Gundy
  • Investors Group Securities Inc.
  • National Bank Financial Ltd.
  • Desjardins Securities
  • ScotiaMcLeod Inc.
  • Manulife Securities
  • Credential Securities