Vanguard, Fidelity Expected to Trounce Competitors

Based on its assessment of fund companies’ customer loyalty, ownership, revenue and equity of brand, Cogent Research has released a ranking of those poised for the greatest future growth, with Vanguard taking the lead position and Fidelity coming in at No. 2.

In fact, Vanguard and Fidelity ranked far higher than other companies and were the only companies to get the highest rating in Cogent’s analysis; Vanguard got the top ratings in all four measurement areas.

“Vanguard has serious momentum behind its mutual fund business, which is strong and getting stronger,” said Bruce Harrington, managing director of Cogent Research. “The only weak spot for the second-place firm, Fidelity, is customer loyalty relative to the firm’s strengths in other areas.”

By comparison, fewer than 7% of investors said they associate any other firm with a specific investment style or attribute, such as low fees, strong customer service and online tools.

“Financial services firms have good intelligence about where they stand today, but it is where their business will be in the future that keeps asset managers up at night,” Harrington said. “If a company has strong brand equity and wallet share among clientele, yet has low customer loyalty, it may look strong today, but it is likely to lose market share in the year ahead.”

Surprisingly, Cogent found that 71% of fund companies have negative customer loyalty scores, meaning that firms have more detractors than supporters, and may even have difficulty maintaining current clients.

Fund companies with affiliated brokerage divisions generate high scores due to increased market share, greater penetration across investment accounts and stronger customer loyalty.

Cogent also found that American Funds, which came in third, has strong ties with the financial advisers through whom it sells its funds, but that it also resonates favorably with individual investors. If American Funds were to market directly to investors, the firm would likely be a juggernaut competing with Vanguard and Fidelity, according to Cogent.