Advisors are happiest when their firm's corporate strategy and compensation are easy to understand and clearly communicated, according to a J.D. Power & Associates study, which ranks firms according to advisor satisfaction.
Edward Jones ranked highest among employee advisory firms, while Commonwealth Financial led the field in the independent channel. Both firms also topped last year's rankings for J. D. Power's U.S. Financial Advisor Satisfaction Study.
The annual study considers seven factors for determining advisor satisfaction: professional support; client-facing support; compensation; firm leadership; operational support; problem resolution; and technology support.
Among those factors, firm leadership and compensation were the most important drivers in determining advisor satisfaction, explains Michael Foy, director of wealth management practice at J.D. Power.
"They're looking for their leaders to effectively communicate the strategic vision of the company and how advisors fit into that," says Foy. "The other part of it is values orientation, creating a culture of accountability. These are traits that advisors value in their leadership."
Foy also notes that while advisors value being paid commensurate with their performance, they also put a premium on the transparency of their compensation packages. Advisor satisfaction improves when their compensation package is competitive, clear and rewards appropriate behaviors, according to the study.
Roughly a third of advisors surveyed said they lacked a complete understanding of their comp plan, leading to a satisfaction score of 631 for that group. Advisors who said they had a better understanding of their pay had a satisfaction score of 781.
More than 3,900 financial advisors participated in the J.D. Power study, which was conducted between January and April 2014. The respondents were almost evenly split between employee and independent channels.
Regional BDs On Top
Regional firms dominated the top rankings of the employee advisory firms. In second place after Edward Jones was Raymond James & Associates, with a score of 867. RBC Wealth Management took third place with a score of 834. The average score on the employee side was 721. Morgan Stanley Wealth Management rounded out the bottom of the list with a score of 596.
On the independent side, following Commonwealth in second place was Cambridge Investment Research, with a score of 913. Raymond James Financial Services came in third with a score of 899. LPL Financial, one of the largest firms by headcount, earned a score of 755, below the average firm score of 778 this year.
Survey data also shows that 87% of employee channel advisors and 93% of independent advisors plan to remain at their current firm for the next 1-2 years. But only 44% of employees and 52% of independents indicated that the cultural values of the firm and client focus were the primary reasons they would stay at their current firm.
About one-third of advisors also said they were remaining put, due to compensation or contract requirements.
Not Big On Technology
J.D Power's study revealed that the wealth management industry suffers when it comes to adopting new technology. While over 80% of advisors using smartphones and tablets said their firms provide tools for those devices, less than 30% admitted to using them for business. Almost half of advisors in the employee channel said their firm does not permit them to make use of social media when communicating with clients. But even among those permitted to take advantage of social media, less than half of all advisors admitted to using these new tools.
"We see there's a bit of a disconnect there, with the firms developing the technologies but not getting the level of adoption they want," says Foy. "Clearly the FAs are either not aware or not fully comfortable or understanding of how these things can benefit their practice."
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