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Edward Jones unseats Charles Schwab; Stifel, LPL tumble as volatility hurts client satisfaction

Reports of the death of the proverbial “rep-as-portfolio manager” appear to have been exaggerated.

Even as the wealth management industry moves to show value beyond stockpicking, clients remain focused on their investments. Client satisfaction overall has dropped, according to J.D. Power’s annual study of full-service firms, and clients' ratings of their investment returns have plummeted by 46 points year-over-year. Companies that fared poorly according to clients included LPL Financial and Merrill.

High-net-worth clients also rated their investment performance 66 points lower than the previous year on a 1,000-point scale, the market research company reports. Between November and January, J.D. Power spoke to more than 4,600 investors who have advisors.

The volatility also played a role in lowering satisfaction on the overall 1,000-point index among clients of two-thirds of the 18 firms covered in the survey. Charles Schwab, which beat Edward Jones by one point last year for its third No. 1 finish in a row, gave way to Edward Jones in 2019.

Other notable risers in the survey include Morgan Stanley and Advisor Group. Morgan jumped from 15th to 4th in the rankings. Advisor Group improved its score by double the amount of any other firm and surged up to near the top from last place in 2018. Stifel Financial (38 points) and LPL (37) suffered the largest blows to their client satisfaction scores.

Advisors vary both in the amount they outsource modeling and other portfolio construction services, as well as in the degree they would like support from their broker-dealer on investment research or talking points for volatile markets, notes recruiter Jodie Papike of Cross-Search.

“It's just something that, from the beginning, has been a very big challenge for advisors,” Papike says. “The true test is, are your clients prepared for when things aren't going that well? Are they prepared to remain patient with you, with the broker-dealer, with the market, with everything that's involved in this business?”

The question of whether clients' advisor explained their 2018 investment performance displayed a stark difference in possible flight risk and referrals. Some 53% of clients who said their advisor did so reported they “definitely will” recommend their advisor.

Only 24% of clients who said their advisor didn’t explain it said they definitely will recommend the advisor. Also, just 10% of clients who received explanations said they definitely or probably will consider switching firms, compared to 20% who didn’t have such a discussion.

“It can be a difficult conversation when clients are losing money, but advisors who fail to have those hard conversations are putting at risk both their future growth opportunities, resulting in reduced client referrals and, in more extreme situations, losing their current clients either to other advisors or to alternative service models,” Mike Foy, J.D. Power’s senior director of wealth intelligence, said in a statement.

Some clients come down with a case of “convenient amnesia” when asked if they have discussed certain things with their advisor, says Diane MacPhee, a CFP and former advisor who now coaches advisors at DMAC Consulting Services.

She favors using memorable phrases — like reminding clients in bull markets that the party doesn’t go on forever, for example. Advisors should also avoid pitfalls in the future by indulging a prospect’s focus on investment returns and ask clients if they have any questions about their portfolio, she says.

“They can explain it over and over again and they'll still get the jittery, skittish client,” she says, suggesting advisors wait to remind clients of their financial plans and the 365-day year after letting the clients vent a bit. “I always say to them that, ‘This is where you earn your fee.’”

J.D. Power has conducted the survey for 17 years. Participating clients said they make some or all of their investment decisions with a financial advisor. At least 1,000 clients of each full-service firm participated in the study.

In addition to investment performance, the survey tracked categories like the clients’ advisors, account information, firm interaction, products and fees. The advisors themselves were the most important factor in the weighted index, followed by account information and investment performance.

To see the results of the 2018 survey, click here. For the full list of this year’s rankings, scroll through our slideshow.

JDPower2019_No15.png
15. AXA Advisors
2019 ranking: 15
2018 ranking: 13
2019 score (on 1,000-point scale): 797
2018 score: 824
2019 vs. 2018: -27
JDPower2019_No14.png
14. LPL Financial
2019 ranking: 14
2018 ranking: 6
2019 score (on 1,000-point scale): 814
2018 score: 851
2019 vs. 2018: -37
JDPower2019_No13-1.png
13. (tie) Citigroup
2019 ranking: 13
2018 ranking: 17
2019 score (on 1,000-point scale): 820
2018 score: 811
2019 vs. 2018: +9
JDPower2019_No13-3.png
13. (tie) Northwestern Mutual
2019 ranking: 13
2018 ranking: 10
2019 score (on 1,000-point scale): 820
2018 score: 839
2019 vs. 2018: -19
JDPower2019_No13-2.png
13. (tie) Lincoln Financial Network
2019 ranking: 13
2018 ranking: N/A
2019 score (on 1,000-point scale): 820
2018 score: N/A
2019 vs. 2018: N/A
JDPower2019_No12.png
12. Merrill
2019 ranking: 12
2018 ranking: 5
2019 score (on 1,000-point scale): 825
2018 score: 852
2019 vs. 2018: -27
JDPower2019_No11.png
11. JPMorgan Chase
2019 ranking: 11
2018 ranking: 11
2019 score (on 1,000-point scale): 826
2018 score: 838
2019 vs. 2018: -12
JDPower2019_No10.png
10. Stifel Financial
2019 ranking: 10
2018 ranking: 3
2019 score (on 1,000-point scale): 827
2018 score: 865
2019 vs. 2018: -38
JDPower2019_No9.png
9. Wells Fargo Advisors
2019 ranking: 9
2018 ranking: 16
2019 score (on 1,000-point scale): 829
2018 score: 814
2019 vs. 2018: +15
JDPower2019_IndustryAvg.png
Average score
2019 score (on 1,000-point scale): 835
2018 score: 839
2019 vs. 2018: -4
Largest increase: Advisor Group (+46)
Largest decrease: Stifel Financial (-38)
JDPower2019_No8-2.png
8. (tie) Raymond James
2019 ranking: 8
2018 ranking: 9
2019 score (on 1,000-point scale): 836
2018 score: 842
2019 vs. 2018: -6
JDPower2019_No8-1.png
8. (tie) Fidelity Investments
2019 ranking: 8
2018 ranking: 6
2019 score (on 1,000-point scale): 836
2018 score: 851
2019 vs. 2018: -15
JDPower2019_No7.png
7. Ameriprise
2019 ranking: 7
2018 ranking: 12
2019 score (on 1,000-point scale): 838
2018 score: 828
2019 vs. 2018: +10
JDPower2019_No6.png
6. UBS Wealth Management Americas
2019 ranking: 6
2018 ranking: 6
2019 score (on 1,000-point scale): 840
2018 score: 851
2019 vs. 2018: -11
JDPower2019_No5.png
5. Charles Schwab
2019 ranking: 5
2018 ranking: 1
2019 score (on 1,000-point scale): 842
2018 score: 867
2019 vs. 2018: -25
JDPower2019_No4.png
4. Morgan Stanley
2019 ranking: 4
2018 ranking: 15
2019 score (on 1,000-point scale): 844
2018 score: 821
2019 vs. 2018: +23
JDPower2019_No3.png
3. Advisor Group
2019 ranking: 3
2018 ranking: 18
2019 score (on 1,000-point scale): 846
2018 score: 800
2019 vs. 2018: +46
JDPower2019_No2.png
2. RBC
2019 ranking: 2
2018 ranking: 4
2019 score (on 1,000-point scale): 848
2018 score: 863
2019 vs. 2018: -15
JDPower2019_No1.png
1. Edward Jones
2019 ranking: 1
2018 ranking: 2
2019 score (on 1,000-point scale): 853
2018 score: 866
2019 vs. 2018: -13