Financial Advisor Satisfaction Survey: The well-known market research firm J.D. Power and Associates (a division of McGraw-Hill) conducts an annual study of financial advisor satisfaction. The study sample is drawn from a database of over 720,000 individuals in the U.S. who hold Series 6 or Series 7 FINRA licenses. This database is maintained by a firm called Qualified Media (QM).
Survey Sample: A random subset of people was drawn from the QM database, in accordance with statistical sampling techniques. These people were invited by mail to complete an online survey between May 23 and June 19, 2008. Surveys with answers to at least 50% of the questions used in calculating satisfaction were treated as valid, and were collected from 3,124 financial advisors. J.D. Power released its results on September 30, 2008. Respondents were divided into two categories:
- Employees of a broker dealer
- Independent financial advisors who process transactions through a given broker dealer
Drivers of Financial Advisor Satisfaction: The J.D. Power survey rolls up its various questions into eight key categories that drive financial advisor satisfaction. Financial advisors were asked to attach a percentage weight to each category to reflect its importance to them, for a total of 100% across all categories. Likewise, financial advisors also had to attach weights to the importance of each individual issue covered under these eight categories.
The numbers in parentheses below reflect the percentage weights attached to the category in question by, respectively, employee financial advisors and independent financial advisors:
- Firm performance (24%, 11%)
- Compensation (16%, 12%)
- Administrative and compliance support (14%, 18%)
- Internal operations support (12%, 22%)
- Job duties (11%, 13%)
- Products and offerings (9%, 7%)
- Problem resolution (7%, 17%)
- Work environment (6%, NA)
Firm performance includes financial outlook, effectiveness of leadership, competitiveness in the marketplace, and hiring and recruiting practices.
Compensation includes payout, job security, retirement benefits, and health insurance.
Administrative and compliance support includes usefulness of the firm's investment research, employee educational opportunities, quality of information technology, responsiveness of information technology staff, appropriateness of compliance oversight, and amount of administrative paperwork.
Internal operational support includes the quality, reliability and helpfulness of fellow financial advisors, other co-workers, support personnel, and supervisors.
Job duties include the amount of challenge provided by the work, the freedom given the financial advisor to recommend the products and services he/she finds most appropriate, and the workload.
Products and offerings include diversity thereof, competitiveness thereof, reasonableness of pricing, and the availability of client education materials.
Work environment includes office conditions, dress code, and quality of break areas.
Best Firms for Financial Advisors: Firms were given a score on a 1,000 point scale, based on the responses of financial advisors to the survey questions. Responses were weighted according to the relative importance that the respondents placed on the various drivers, as well as by the firms' market shares. Only firms with at least 100 valid surveys were rated.
Responses from independent financial advisors were not robust enough to rank firms, given J.D. Power's standards, from their viewpoint. Employee financial advisors ranked the firms this way:
- Edward Jones (879)
- Raymond James (879)
- Merrill Lynch (697)
- Industry Average = 655
- Wachovia Securities (627)
- Citigroup Global Markets (Smith Barney) (624)
- UBS Financial Services (598)
J.D. Power released individual firm rankings on seven of the eight measurement categories. They excluded problem resolution.
- Edward Jones, Raymond James and Merrill Lynch were above the industry average in all seven categories.
- Merrill Lynch was third in each category.
- Edward Jones was first in three categories: work environment, internal operational support, and administrative and compliance support. It was second in the rest.
- Raymond James was first in four categories: job duties, products and offerings, compensation, and firm performance. It was second in the rest.
- UBS and Wachovia were below average in all categories except work environment.
- UBS finished last in five categories.
- Citigroup was above average only in job duties and compensation.
A problematic feature of the study is that one major full-service securities firm, Morgan Stanley, did not elicit enough valid responses to be ranked.