Despite gains US investors are still more sceptical of brokers, study shows

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Monday, 02 August 2010 08:45

US investors have grown more sceptical of their full service brokers despite overall satisfaction rebounding along with the markets during the past year, according to a new survey.

On average, full service brokerages boosted their satisfaction score from the past year, reflecting the market’s recovery and also greater reliance on advisers but the general reputation of brokerages continued to sink, the latest annual survey from marketing services company J.D. Power & Associates shows.

The survey, which measures investor perceptions of their advisers, their investment performance, account fees and other issues, put Edward Jones, Royal Bank of Canada’s RBC Wealth Management and private equity controlled LPL Financial as the top three firms.

The industry’s three biggest firms, Bank of America Merrill Lynch, Morgan Stanley Smith Barney and Wells Fargo Advisers, ranked below the industry’s average and received some of the lowest overall satisfaction scores.

The lowest ranked firm was Chase Investment Services, a unit of New York based JPMorgan Chase, while Merril Lynch/Banc of America Investment Services, a unit of North Carolina based Bank of America, was next to last after taking the bottom spot in the 2009 survey.

An increasing proportion of investors said they believe their investment firm is driven more by profit concerns than focused on the customer, the survey of 4,460 investors found.

‘Most investors have enjoyed positive short term gains in their portfolio as a result of the market recovery but this has not translated into an improvement in investor sentiment toward their firm,’ said David Lo, investment services director at J.D. Power.

‘Communicating reasons for investment performance has a considerably strong impact on satisfaction,’ he added. Customers who received investment performance updates gave their brokers much higher average scores than those who did not receive these details.

Practices such as engaged client/advisor relationships that involve the development of an investment strategy; periodic review of investment objectives; regular communication around and reasons for investment performance; and a clear explanation of fees and commissions,” may boost overall satisfaction, according to the report.