Clients give top marks to Charles Schwab, Edward Jones; Wells tumbles

Charles Schwab won top marks from clients for the third consecutive year in J.D. Power’s annual study of full-service firms. Overall, investor satisfaction hit a record high for the second consecutive year. Indeed, only Wells Fargo Advisors, which fell towards the bottom of the rankings, saw its ratings fall from the previous year.

J.D. Power, which released its study this week, gives the greatest weight on its 1,000-point scale to clients’ views of their financial advisors. But what shapes those perceptions?

Mike Foy, senior director of J.D. Power’s wealth management unit, does not attribute the 15-year record score of 839 points entirely to the strong gains in the stock market over the past year. (J.D. Power quizzed 4,419 clients in December before the the volatility seen in recent weeks.)

Even with those market tailwinds, investment performance was the third most important factor of eight overall. The higher ratings also reflect better client experiences as technology allows for full-service advice and self-directed tools, Foy says.

“The lines between those two groups have become very blurry,” Foy says. “You increasingly have more and more folks who are looking for some combination of advice but also the tools to do some things themselves. We included questions about aspects of the experience that we’ve historically only asked self-directed investors.”

The new elements include measures of online and mobile experience and access to research, in addition to existing categories like product offerings, commissions and fees. Schwab has always received positive scores on products and low prices, but the firm scored the best in the new metrics, Foy says.

Schwab offers many different types of services across its business lines with well-integrated access points for clients, says Tim Welsh, CEO of consulting firm Nexus Strategy. With Fidelity and TD Ameritrade boasting similar appeal, the J.D. Power ranking looms large in Schwab’s marketing, he notes.

“In a sea of homogeny where everyone’s the same, any time you can differentiate yourself with a third-party award, you’re going to do it,” Welsh says. “It’s a great differentiator.”

Other firms also achieved positive results in the annual survey. Edward Jones maintained its high position in the rankings, while RBC Wealth Management, Stifel Financial and Northwestern Mutual made significant gains on the strength of their advisor-client relationship ratings, Foy says.

On the other hand, Wells Fargo sank to the bottom of every measure of brand image, he notes. Revelations involving unauthorized bank accounts, insurance and mortgage practices appear to have taken a toll even before a new probe into possible sales misconduct in the wealth management unit.

Fidelity’s position in the rankings also fell, although the firm’s overall score went up. Since the survey measures direct retail clients of firms’ advisors rather than custodial clients, the results display how Schwab has improved its full-service advice over the past several years, Foy says.

“Fidelity has a lot of the same strengths that Schwab has, in terms of the legacy as a discount brokerage. They have a strong digital platform, they do well around fees,” Foy says. “Schwab has made a bit more progress in terms of improving the quality of that financial advisor experience.”

To see how firms measured up in last year’s study, click here. For the results of the 2018 survey, click through the slideshow.