Edward Jones led JD Power’s latest investor satisfaction ranking, which detailed the looming challenges for wealth managers. Investor preferences, from fees to modes of communication, are changing rapidly, according to JD Power. According to the data and analytics firm, a gap is growing between younger and older clients as to how they want to interact with full-service wealth management firms.
“Investors under 40 change much faster in terms of wealth management preferences and priorities, and they look increasingly different from baby boomers,” said Mike Foy, senior director of wealth intelligence at JD Power, in a press release. “Not only has the pandemic dramatically accelerated their transition to a more digital engagement, but emerging issues like ESG are also a top priority for them that is not yet seen as much among baby boomers.”
Edward Jones, of whom 17,000 advisers typically operate in individual offices, scored the highest with 770 out of 1,000 possible points in the JD Power ranking.
ranked second with 760. Fidelity, RBC and
were tied for third at 751.
Merrill (708), Advisor Group (685) and Prudential (650) round out the bottom of the ranking of 19 companies. The industry average score was 732, according to JD Power.
More than half of clients under 40 prefer digital channels (email, SMS and video calls) to communicate with advisors. Only a quarter of older investors said the same. In general, the older generation prefers speaking with an advisor in person or over the phone, according to the JD Power survey, which interviewed 4,392 investors.
Young investors are also interested in different fee models. Seventy-four percent of investors under 40 would prefer to pay for full-service wealth management through a one-time fee-for-service model. A similar number say they also like a subscription model for wealth management services.
Older investors, on the other hand, don’t buy it. Forty-two percent would support a fee-for-service model and 34% a subscription model, according to JD Power.
It is also possible to improve transparency on how customers pay for services. Overall, only 47% of customers said they fully understood the fees they were paying. And about a third of clients say their advisor uses lingo they don’t understand, according to the survey.
Companies that do not adapt to these demographic shifts and preferences risk turning potential or current customers away.
“Wealth management providers are wrong if they assume that emerging affluent investors will simply become baby boomers over time. Businesses able to recognize and respond to these changing needs will define success through the great transfer of wealth, ”said Foy.
Young investors are twice as likely to make financial changes as their older peers, according to JD Power. Fifty-eight percent of investors under the age of 40 have made changes to their investment portfolio in the past year. Only 28% of older investors made similar changes.
JD Power has redesigned its annual survey, which is now in its 19th edition. The new format measures overall investor satisfaction with full-service investment firms, with a focus on trust; people; products and services; value for fees; ability to manage wealth as and when clients wish; problem resolution; and digital channels.