What firms are winning the hybrid advice race?

Vanguard topped its competitors in the self-directed investment space for a second straight year, winning top marks in J.D. Power’s survey in newly separated hybrid and do-it-yourself categories.

The consulting and market research firm polled 5,500 self-directed investors as wealth management firms increasingly deploy online and call-center services in an effort to free up financial advisors’ time while growing their client bases. J.D. Power released the rankings on April 26.

Firms like Merrill Lynch, Wells Fargo and Fidelity have offered clients a variety of levels of services in recent years, and their investments appear to be paying off: retail investors seeking some type of guidance gave them much higher satisfaction scores than the DIY investors.

J.D. Power broke the responses apart for the first time “to quantify how the experiences are different and how the drivers of satisfaction and loyalty are different,” says Mike Foy, the senior director of the firm’s wealth management practice. Advisors can take a great deal from the results, he says.

“They are coming at a premium price to a call center-type model,” Foy says. “So understanding what is being provided to clients within those [models] will help them think about what they need to do above and beyond that, to justify a higher price point for a client.”

Slashed fees certainly helped lead to the milestone reached at the beginning of the year by Vanguard’s Personal Advisor Services, which became the first digital advice platform to reach $100 billion in assets under management. The firm is “hitting all the right notes,” says Greg O’Gara of Aite Group.

“Their PAS model is essentially hybrid and they have multiple ways to connect with advisors. They also have some of the best pricing in the industry,” O’Gara, a senior research analyst in the consulting firm’s wealth management unit, writes in an email. “If their clients are getting a great service at a great price, it becomes the foundation of a winning business model.”

Foy agrees, noting that some reports he’s seen questioning whether Vanguard’s infrastructure and client service have kept up with the flow of AUM were not borne out in the survey.

J.D. Power conducted the study in December 2017, quizzing the self-directed investors on seven criteria and investors seeking guidance on eight, with advisors’ services as the additional category. Firm interaction, account information, commissions and fees and product offerings also figured into the survey.

The top takeaways standing out for Foy include the lower marks for clients who have made the shift to hybrid platforms from personal advisors, often as a result of account-minimum requirements. The survey also shows that firms with hybrid offerings should boost the human aspects of them, Foy adds.

“Many of the clients who are part of that forced migration, call it, tend to certainly have lower satisfaction scores than those who come voluntarily into that model and have made that choice consciously,” he says.

“It’s important for firms to go beyond just on-demand advice and guidance. It’s not enough to just say, ‘Oh, here’s a number that you can call if you want help,’” Foy continues. “Some even minimal level of outreach made an enormous difference in client satisfaction.”

The top-line finding for O’Gara revolves around advisors’ use of technology. Firms and advisors must figure out how to leverage in-house and third-party resources with a “modularized approach,” he says, citing TD Ameritrade’s RIA platform as an example.

“My key takeaway for advisors is that technology will improve your efficiency,” O’Gara says. “It will improve every aspect of client service. Those advisors who do not fully embrace technology as a way to grow their books, and increase client satisfaction, will be in trouble.”

For the full rankings based on the overall satisfaction of self-directed clients seeking guidance, tracked on a 1,000-point scale, click through our slideshow. To view the results of last year’s self-directed client survey, click here.