Overall investor satisfaction with self-directed investment firms decreases from 2012, as investment firms struggle to find the right method and frequency of communicating with investors, according to the J.D. Power & Associates 2013 US Self-Directed Investor Satisfaction Study.
The study, now in its 12th year, measures investors’ satisfaction with their investment firm based on performance in six factors (in order of importance): interaction; account information; trading charges and fees; account offerings; information resources; and problem resolution. Overall satisfaction in 2013 averages 752 (on a 1,000-point scale), down from 768 in 2012.
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Challenges with effective communication are contributing to the decline in satisfaction. Although investment firms are offering more online tools and information for self-directed investors in 2013, the additional content and capabilities may actually make it more difficult to access the functions investors are seeking if a website is not easy to navigate and communication is not clear.
For example, overall satisfaction declines by 72 points when website functions are difficult to locate. When investment firms do not communicate frequently enough and do not communicate via investors’ preferred methods, satisfaction declines by 62 points.
Further, the study finds that, industry-wide, performance in meeting several key communication-related metrics has declined from 2012, including:
— The percentage of investors who say they "completely" understand their fee structure has dropped to 35 percent in 2013 from 39 percent in 2012.
— The proportion of investment firms that have contacted investors two or more times in the past 12 months–the minimum standard–regarding products, services or educational seminars has declined to 34 percent from 39 percent, which impacts multiple aspects of a firm’s relationship with its investors.
— The incidence of investor awareness/use of at least one financial planning tool has declined to 28 percent from 31 percent.
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By GlobalData"Investment firms miss an important opportunity to keep self-directed investors informed about fees, investor tools and other product offerings by not communicating in the manner and frequency that investors prefer," said Craig Martin, director of the wealth management practice at J.D. Power.
"Firms need to know how their investors would like to be notified–whether it occurs via email, phone or other means. It’s important to contact investors proactively and at the appropriate frequency based on investor preference."
The study also finds that the type of information firms are communicating is another important driver of satisfaction. For example, although 55% of investors indicate their firm offers investment education seminars to inform them about investment tools, news, guidance and research/analysis, only 7 percent of investors indicate attending one of these seminars.
"While, in theory, offering more tools and services may seem to be better, those offerings will have limited value if the features and benefits aren’t applicable to the majority of investors," said Martin. "Investment firms need to understand the trading behaviors of their investors and provide them with information, tools and other capabilities that will address their highest priority needs. Taking a one-size-fits-all approach is likely to result in fewer investors being satisfied."
J.D. Power says self-directed investors should:
— Leverage the tools and resources, such as educational seminars, available from your investment firm to help you research, analyze and invest more prudently.
— Make sure your investment firm knows your preferred method of contact– email, phone, or mail–so you will receive all communications in a timely manner.
— Consider increasing the interaction with your investment firm’s local branch, which is an excellent resource for investment guidance.
