Canadians are increasingly satisfied with their discount brokerage firms, according to a recent study by J.D. Power, and as such advisors trying to keep their own clients happy will need to focus more on personalized advice and service.
Now in its sixth year, the study, called the J.D. Power 2014 Canadian Discount Brokerage Investor Satisfaction Study, was released on Monday. The study’s results reveal that overall satisfaction with discount brokerage firms in Canada increased to 736 – on a 1,000-point scale – in 2014, up 12 points from last year.
The study measures investor satisfaction using the following six factors (ranked in order of importance): interaction; trading charges and fees; account information; account offerings; information resources; and problem resolution.
Highly satisfied investors frequently use tools and seminars offered by the discount brokerage. For example, satisfaction levels reach 819 for firms that meet three key performance indicators related to resources – offering investment seminars; investors are aware of and use at least one investment tool and are aware/use a financial planning tool – compared to the 671 score of firms that did not meet those indicators.
Also, the study found that clients felt greater satisfaction with discount brokerages that provided tools that focused on their personal investment goals. For example, firms that offered “very useful” guidance through investment tools saw satisfaction levels of 868 compared to the 753 ranking given to firms that did not have such customized offerings.
Mike Foy, director, wealth management practice, J.D. Power, in New York sees this interest of clients in both technology and tailored advice as a reason for the growth of “robo-advisors” — a term frequently used to describe companies that automate much of the investment process but also have a dedicated licensed representative available to clients.
“I think clearly the automation of the asset allocation model makes a lot of sense, it’s something that’s appealing from a cost perceptive and it’s something that is going to continue to build momentum,” says Foy. However, Foy also emphasizes the growing importance of communication with clients.
For instance, overall satisfaction levels reached 777 with investors whose firms contacted them two or more times over the past 12 months about products, services and seminars compared to the 721 satisfaction ranking given to firm that did not contact clients as often.
Advisors worried about the growing interest in discount brokerages should therefore pay closer attention to their value proposition and the level of communication and service they provide to their clients.
“[Advisors] need to be continuing to add value to their clients in ways that are not as easily replicated by technology,” he says. “So, having a real personal relationship with a client, understanding their personal life circumstances, their goals and being able to deliver really tailored advice is something that technology just can’t do as well as a human advisor.”
As well, educating clients regarding their investments and being transparent about fees are other ways advisors can keep their clients happy, says Foy, and add more value to their services.
Overall satisfaction scores for discount brokerage firms in the study ranked as follows: Disnat, 772, National Bank Direct Brokerage, 757, RBC Direct Investing, 751, TD Direct Investing, 744, BMO InvestorLine, 734, Scotia iTRADE, 725, CIBC Investor’s Edge, 708. Other firms included in the study but not ranked due to a small sample size are Credential Direct, HSBC InvestDirect, Qtrade Investor and Questrade.
Results for the study were complied from the responses gathered between May 16, 2014 and June 16, 2014 of more than 2,500 investors using investment services with discount brokerage firms in Canada.