Full-service wealth firms failing to provide true comprehensive advice

Only a small percentage of investors in Canada receive holistic and comprehensive financial advice, finds J.D. Power

Full-service wealth firms failing to provide true comprehensive advice

Investor satisfaction with full-service wealth management firms in Canada has risen slightly to 669 (on a 1,000-point scale) from 666 a year ago, but only a tiny fraction of those investors is receiving the holistic and integrated financial advice that is the industry's core value proposition, according to J.D. power’s latest research.

Among more than 4,500 respondents to the J.D. Power Canada 2022 Full-Service Investor Satisfaction Study, 40% think their financial advisor offers them complete advice.

However, just 7% of investors receive all of the characteristics of comprehensive advice as defined by the firm’s criteria, which include making recommendations in the best interests of an investor; understanding an investor's goals and needs; and having a documented financial plan.

The findings of this year's survey also show that Canada's wealth management space is lagging behind that of the United States, where 14% of full-service customers receive comprehensive guidance in 2022.

“As the traditional advice model faces more challenges from lower cost and technology-driven alternatives such as digital or robo-advice, it’s more critical than ever that advisors provide something truly differentiating to their clients,” Mike Foy, senior director of wealth intelligence at J.D. Power, said.

“While the industry has long touted comprehensive advice, the study shows that very few full-service investors in Canada—even those with high net worth—are truly receiving such advice from their advisors. And, while many investors may be willing to settle for something less, it’s the investors who do receive comprehensive advice that consistently provide the referrals that drive growth,” he said.

Some of the study's significant results for 2022 emphasize a connection between client retention and brand trust. When problems arise with their investment firm or investment performance falls short of expectations, clients with stronger brand trust are less likely to leave.

Moreover, when clients are dissatisfied with the performance of their portfolio, 15% of those with poor brand trust consider transferring firms, compared to only 5% of those with high brand trust. Transparency, reliability, and the capacity to meet customer service expectations are all factors that influence brand trust.

According to the survey, the first three years of the advisor-client relationship are when trust between clients and their wealth management organizations rises the fastest; after that, the risk of attrition decreases. Clients with one year of tenure have a 10% probability of switching, while those who have been with a firm for four years have a 5% possibility.

Investor satisfaction is maximum when clients have a combination of human and digital interactions, but there are substantial disparities in the optimum blend for different age groups. When it comes to advice and planning, boomers clearly prefer personal interaction, but they are more comfortable using digital channels for service and administration. Millennials, on the other hand, prefer a mix that includes digital across the board.

Overall, with a score of 709, Raymond James ranks first in total investor satisfaction, followed by Edward Jones (699), then CI Assante (691).