The financial services sector tends to tout its focus on goals-based investing, but according to the Canadian investors surveyed for U.S.-based J.D. Power and Associates’ 2016 Canadian Full Service Investor Satisfaction Study, their financial advisors are not following through in this area.
Survey participants were asked about their advisor’s success in helping them set personal goals, implementing a strategy to achieve those goals and monitoring their progress. Only 34% said their advisor effectively delivers service for all three components while 54% stated that their advisor helped them set goals and discussed risk with them.
“These results don’t speak well for the industry as a whole. Investors have some newer, more compelling lower-cost alternatives available to them, including robo-advisors,” says Mike Foy, director of the wealth-management practice at J.D. Power, in a statement.
“In addition, with [mandated fee disclosures under the second phase of the client relationship model] beginning to roll out, many investors will be learning for the first time exactly what they have been paying for,” he continues. “Advisors who aren’t adding value for their clients beyond asset allocation may be in real trouble.”
Fee transparency continues to be an issue, as only 27% of investors surveyed said they “completely” understand their fees. However, a discussion between advisors and clients about fees leads to a dramatic jump in those who feel they understand what they are being charged; in fact, 43% of investors who have had that discussion with their advisors and received a fee summary from their financial services firm said they understand their fees compared with the 11% who only received a summary.
The financial services sector is also contending with a shift in consumer expectations between generations, according to the report, which states that 42% of millennial investors want to play a more active role in the management of their finances. This still includes access to an advisor for guidance and to act as a sounding board. In contrast, baby boomers tend to defer to their advisor’s decisions.
“Wealth-management firms and advisors must be cognizant of the increasing prevalence of the [millennial] investor’s mindset and the challenges it presents,” Foy says. “It doesn’t necessarily mean advisors become less important, but the role they play for investors may be different. They can’t just manage portfolios; the best advisors of the future will need to be part coach, part teacher and part financial therapist. “
The service advisors provide is one of the main reasons why Mississauga, Ont.-based Edward Jones finds itself on top of a ranking of full-service investment firms in Canada for the fourth consecutive year with a score of 802 out of 1,000. Edward Jones’ performance is highest in the four most critical factors that drive satisfaction in this survey: financial advisor, account information, investment performance and product offerings.
Toronto-based Raymond James Ltd. lands in second place with a score of 779 and HollisWealth Inc., also of Toronto, rounds out the top three with a score of 776.
A full ranking of the investment firms that were included in the survey can be found on J.D. Power’s website.
The findings of this survey are based on the responses of 5,159 investors who use advice-based investment services from financial services institutions in Canada. The responses were gathered in May and June.
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