An Improvement of Only 1 Percent in Advisor Retention Can Drive Nearly $20 Million in Retained Revenue
WESTLAKE VILLAGE, Calif.: 2 May 2007 — Edward Jones ranks highest among 10 financial investment firms in satisfying their financial advisors, according to the J.D. Power and Associates 2007 Financial Advisor Satisfaction StudySM released today.
The inaugural study measures the satisfaction of financial advisors with the investment firms in which they work by examining seven factors: support, firm performance, compensation, people, products and offerings, work environment and job duties. The support factor specifically examines satisfaction with sales, technology and compliance support, and training and resources, while the people factor examines satisfaction with co-workers, back-office operations and immediate supervisors.
Edward Jones leads the industry with a score of 892 points on a 1,000-point scale, receiving particularly high ratings from advisors in support, people and firm performance. Linsco/Private Ledger follows with 880 points and performs particularly well in products and offerings, work environment, job duties and compensation. A.G. Edwards (822) ranks third overall.
The study finds that financial advisor satisfaction and retention are absolutely critical to investment firms, as the typical advisor manages nearly $70 million in assets. While only 9 percent of advisors leave their firm each year, when advisors do switch, they take an average of 51 percent of their clients and assets with them. At a typical-size firm with at least 5,000 advisors, each 1 percent improvement in advisor retention translates to a potential $1.75 billion in retained client assets and nearly $20 million in fee revenue.
“The benefits of advisor satisfaction are clearly evident — happy advisors equals increased investor satisfaction, revenue retention and reduced recruitment costs,” said Rocky Clancy, executive director of financial services at J.D. Power and Associates. “Fewer advisor turnovers translate into lower recruiting requirements, while referrals from satisfied financial advisors can attract additional high producers to a firm. The impact of a satisfied or unsatisfied advisor can truly affect the performance of an investment firm on a variety of fronts.”
Despite the common perception that compensation is the most important component in advisor satisfaction, the support factor has the most significant impact on the satisfaction of financial advisors. However, advisors cite particularly low levels of satisfaction with their support. Specifically, problem resolution, level of support staff and compliance support yield low ratings from advisors. The amount of time spent on compliance-related work greatly impacts overall satisfaction, and firms that can keep compliance activities to less than 5 hours per week tend to receive higher satisfaction scores from their advisors. The average advisor currently spends an average of 8.5 hours per week on compliance work.
The study also finds that the number of sales assistants assigned to work with an advisor has an impact on satisfaction within the support factor. Advisors with three or more sales assistants report satisfaction levels that are 114 index points higher on average than advisors with one or none at all. Currently, nearly 60 percent of advisors have no assistant.
“Providing the advisor with an ample and knowledgeable support team can help soften the burden of compliance work and increase satisfaction with the support factor overall,” said Clancy. “In general, advisors want to feel that their firm is behind them as they do their job to work in the clients’ best interest. Enhancing the support functions and making processes more convenient can truly give advisors a sense of how valuable they are to their firm.”
The 2007 Financial Advisor Study is based on responses from 4,008 financial advisors who are registered with the National Association of Securities Dealers (NASD). The survey was conducted online from January to February 2007.
About J.D. Power and Associates
Headquartered in Westlake Village, Calif., J.D. Power and Associates is an ISO 9001-registered global marketing information services firm operating in key business sectors including market research, forecasting, performance improvement, training and customer satisfaction. The firm’s quality and satisfaction measurements are based on responses from millions of consumers annually. J.D. Power and Associates is a business unit of The McGraw-Hill Companies. www.jdpower.com
About The McGraw-Hill Companies:
Founded in 1888, The McGraw-Hill Companies (NYSE: MHP) is a leading global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor’s, McGraw-Hill Education, BusinessWeek and J.D. Power and Associates. The Corporation has more than 280 offices in 40 countries. Sales in 2006 were $6.3 billion. Additional information is available at http://www.mcgraw-hill.com.
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