Couple getting financial advice

Economic uncertainty and market volatility could cause some wealth management firms to struggle to retain clients who become unsatisfied. However, firms with higher levels of brand trust will likely better weather the storm, according to findings from a report released on Thursday. 

The J.D. Power 2020 Canada Full-Service Investor Satisfaction Survey, which was conducted before the pandemic, found a significant improvement in client satisfaction with investment firms, increasing to 790 (on a 1,000-point scale) from 778 year over year. 

The study found that 70% of Canadian investors who highly trust their investment firms said they’ll stay loyal — even when portfolio performance lags expectations. When brand trust is weak, however, only 16% of investors said they’ll remain with their current firms. 

“Brand trust is not something that is built overnight, and wealth management firms with strong brand equity are better positioned to avert client attrition during periods of market volatility, economic uncertainty or when things go sour,” says Mike Foy, senior director of wealth intelligence at J.D. Power, in a release.

In addition, the study found that advisors who use digital channels to communicate with clients, such as video conferencing, text and email, are 35% more likely to see increased investment from clients than when no digital contact is used. 

Demographic insights were also revealed. For example, millennial investors are five times more likely to jump ship compared with boomer investors — 31% compared with 6%, respectively. That finding may be particularly concerning given that millennials are better promoters, with 36% of them saying they’d make a referral if asked by their advisors, compared to 17% of boomers. 

When it comes to wealth transfer, only 31% of boomer investors had been asked by their financial advisors about their beneficiary’s investment needs, despite 68% having designated a next-generation beneficiary. 

For the eighth consecutive year, Edward Jones ranked highest in client satisfaction with a score of 836. Assante (829) and Raymond James (813) ranked second and third, respectively.  

The Canada Full-Service Investor Satisfaction Study measures overall investor satisfaction with investment firms in eight categories, including advisor and investment performance. The 2020 study was conducted from November 2019 to January 2020 and is based on responses from 4,328 investors in Canada who make some or all of their investment decisions with a financial advisor. 

Read the full report here.