"Investment firms miss an important opportunity to keep self-directed investors informed... by not communicating in the manner and frequency that investors prefer."
Scottrade and Charles Schwab & Co. top J.D. Power & Associate’s 2013 Self-Directed Investor Satisfaction Study. But overall satisfaction with self-directed investment firms is down from last year, reflecting “challenges with effective communication,” according to the report released Monday.
The study, now in its 12th year, measures investors' satisfaction with their investment firm based on performance in six factors: Interaction; account information; trading charges and fees; account offerings; information resources; and problem resolution. Overall satisfaction in 2013 dropped from 768 (on a 1,000-point scale) in 2012 to 752.
Rounding out the top five on the Self-Directed Investor Satisfaction rankings were Vanguard, T.Price and TD Ameitrade.
The J.D. Power study attributes the decline in satisfaction primarily to websites that are not user-friendly, hampering investor communication. “Although investment firms are offering more online tools and information for self-directed investors in 2013, the additional content and capabilities may actually make it more difficult to access the functions investors are seeking if a website is not easy to navigate and communication is not clear,” J.D. Power observed in a statement. Among the study’s finding:
· Overall satisfaction declines by 72 points when website functions are difficult to locate.
· Satisfaction declines by 62 points when investment firms do not communicate frequently enough and do not communicate via investors' preferred methods
· The percentage of investors who say they "completely" understand their fee structure has dropped from 39 percent last year to 35 percent.
· The proportion of investment firms that have contacted investors two or more times in the past 12 months—the minimum standard—regarding products, services or educational seminars has declined from 39 percent to 34 percent
"Investment firms miss an important opportunity to keep self-directed investors informed about fees, investor tools and other product offerings by not communicating in the manner and frequency that investors prefer," said Craig Martin, director of the wealth management practice at J.D. Power, in a statement. "Firms need to know how their investors would like to be notified—whether it occurs via email, phone or other means. It's important to contact investors proactively and at the appropriate frequency based on investor preference."
Forty percent of Millionaire investors report being contacted quarterly by their financial advisor, according to a 2012 investor survey conducted by Spectrem’s Millionaire Corner. Nearly one-fourth (23 percent) said they are contacted monthly.
These investors put a high premium on prompt communication. Ninety-four percent said they expect their advisor to respond promptly to their inquiries and questions. Just over one-third (34 percent) said they would expect their advisor to return a telephone call the next day, while 23 percent would want a response in up to two hours.
An even higher percentage (38 percent) expects a response to an email by the next business day. Investors under the age of 45, who are generally considered to be more tech-savvy than their older counterparts and more wired for instant information, are most likely to expect an email response in between one and two hours (33 percent vs. 18 percent of respondents overall).
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.