Mandeville, Smart Money introduce WealthPort service

Many self-directed investors have a strong interest in receiving more guidance, and many may be open to moving their services to robo-advisors, which may provide a viable, low-cost alternative to going it alone or working with a traditional full-service advisor, according to the results of J.D. Power & Associates’ 2016 Canadian Self-Directed Investor Satisfaction Study, released on Monday.

“The robo-advisor market in Canada is still relatively small, but there are a number of factors likely to drive continued growth,” says Mike Foy, director of the wealth-management practice at J.D. Power, in a statement. “Millennials are now the largest segment of the workforce and are not only more comfortable than their parents with technology-based solutions, but they’re also more likely to be looking for guidance as they accumulate wealth and their financial lives become more complex.”

The appeal of robo-advisors is highest among millennial investors, as 66% of them indicate they would be interested in robo-advice if their discount brokerage offered it, according to study’s findings. That compares with 54% of all investors. In fact, the percentage of millennials who indicated they have actually used a robo-advisor is almost double that of the overall market, at 11% vs 6%, respectively. Among millennials who have used a robo-advisor, 54% are either equally satisfied or more satisfied with their robo-advisor experience as they are with their primary self-directed firm.

The study also finds that despite all the attention on the second phase of the client relationship model, little to no progress is evident in terms of increasing investor understanding of fees.

“The needle really hasn’t moved in five years,” Foy says. “In 2012, only 39% of self-directed investors said they completely understood the fees they were paying, and in 2016 it’s still 39%. Increased disclosure does not automatically create transparency. Firms need to ensure they’re explaining information effectively, as we see a very strong correlation between understanding and satisfaction when it comes to fees.”

When it comes to investors’ satisfaction with their self-directed brokerages, National Bank Direct Brokerage ranks highest for a second consecutive year, with a score of 774 out of 1,000; the firm performs particularly well in the interaction, account information and product offering factors. Following in the rankings are BMO InvestorLine (762), CIBC Investor’s Edge (751) and RBC Direct Investing (751).

The 2016 Canadian Self-Directed Investor Satisfaction Study, now in its eighth year, measures investor satisfaction — among those who don’t work with an advisor for their primary account — with their discount brokerages in six key factors, in order of importance: interaction; account information; trading charges and fees; product offerings; information resources; and problem resolution.

Due to methodology changes to the study, previously known as J.D. Power Canadian Direct Brokerage Investor Satisfaction Study, results from 2016 cannot be compared with those from previous years. The study includes responses from more than 2,800 investors who invest primarily with self-directed investment platform providers in Canada. The survey was conducted this past May and June.

The survey also found that among millennial self-directed investors, 37% have a secondary full-service investment account vs 24% of baby boomers. Among millennials who do not, 21% say they expect to need one in the future. They’re also much more likely to use planning tools and attend educational seminars.

Meanwhile, on average, investors who gave their self-directed brokerage a rating between 700 and 799 say they make 1.3 net positive comments about their firm, while those in a higher range of satisfaction (800-899) more than double that at 2.7 net positive comments. This doubles again among those in a satisfaction tier above 900, making an average of 5.2 net positive comments.

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