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J.D. Power: Satisfaction With Self-Directed Investment Firms Declines

Scottrade emerged as the top-rated firm in J.D. Power & Associates 2013 U.S. Self-Directed Investor Satisfaction Study, but overall investor satisfaction with self-directed firms declined from last year.

Self-directed investment firms struggled to “find the right method and frequency of communicating with investors,” the study stated. Investors’ satisfaction was based on interaction with the company; account information; trading charges and fees; account offerings; information resources; and problem resolution. Overall satisfaction in 2013 averaged 752 on a 1,000-point scale, down from 768 in 2012.

Charles Schwab placed second in the rankings, followed by Vanguard, T. Rowe Price, TD Ameritrade, E*Trade Financial and Fidelity Investments.

A decrease in customer satisfaction with company web sites was a major reason for the overall drop, according to Craig Martin, director of wealth management practice at J.D. Power.

“Even though technological sophistication is rising, web satisfaction is trending down,” Martin said in an interview with Financial Planning. “They’re not just comparing web sites of financial firms. They’re comparing the web sites of financial firms to the broader market place.”

What’s more, investment firms appear to be putting too much information on sites, too little of which is applicable to the average customer, Martin said.

“They’re adding new capabilities, but losing sight of key functionality for the average user,” he explained. “All those offerings will have limited value if they aren’t applicable to the majority of investors. There’s a big opportunity for self-directed investing firms to do a better job tailoring their message to specific groups of customers and providing them with the most important information for their specific needs.”

Gregg Murphy, senior vice president, brokerage for Fidelity agreed, citing the increasingly broad product offerings now on the market.

“There’s an awful lot of information available to individual investors,” Murphy said.  “We want to do a better job of managing content and make it easier for people so they’re not scouring the site to find what they need. We’ve done a lot of re-structuring on the site and will be doing significantly more in the coming months.”

The increase in popularity of investment choices such as options has also triggered a need for greater customer education, Murphy said.

“We’re seeing more investors getting involved in different security types,” he said. ‘They’re expanding their use of options, for example, to generate income and protect individual positions or portfolios. There’s a growing demand for education about those products and we’re producing more webinars, educational seminars and content to meet it.”

Mobile communications with customers, while growing in importance, has “not yet become a key driver” of satisfaction for self-directed customers, Martin said. But the study did find that combining the “desired frequency “ of contact with the “preferred method” of contact, whether it be e-mail, phone or mail, does have a positive impact on investor satisfaction.

Communication about pricing was largely responsible for Scottrade’s rise to first-place in the rankings this year from third-place in 2012, according to Martin.

“They do an excellent job of making sure clients completely understand their fee structure,” he said.

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