Investors say wealth managers are missing the mark on advice

The news: Investors are struggling to find the advice and services they need, regardless of how they access wealth management services, according to two new surveys from J.D. Power.

  • The surveys took place from November 2021 to January 2022.
  • Each collected responses from more than 4,000 US investors who worked with a dedicated financial advisor or finance professional or who made their own investment decisions without consulting an advisor.

Key data: A survey focused on investors who engage with a full– Wealth management service. The other was aimed at investors who had opted for a self-guided investment approach, primarily starting during the pandemic.

The biggest discovery is that neither group of investors is getting what they need from their current provider:

  • Only 14% of full-service investors receive comprehensive advice that takes into account their complete financial situation.
  • More … than three-quarters of self-directed investors say they would consider switching providers.

Full Service Advisors: The survey found that they don’t necessarily see attrition, but it could be because their clients don’t know what a solid financial plan should look like.

  • While 51% of full-service investors believe their financial plan is adequate, JD Power found that only 26% of these investors’ plans fully document and update the investor’s goals and needs.

Self-directed investors: These pandemic-era investors — who tend to be younger, with less established financial health — are experiencing technical issues such as website outages and processing issues when managing their accounts. In addition to the digital challenges these investors face, they often struggle to pay their bills or build an emergency spending fund.

  • Only 39% of those who started investing themselves during the pandemic are considered financially sound.

Differing conclusions: Despite the bleak key data, there is a clear difference in customer engagement. Full-service investors say they plan to stick with their investment company.

  • 76% of full-service investors will not consider moving to a new business.
  • the Net Promoter Score of this group is 93.

Do-it-yourself investors who indicated they would consider changing their investment firm named the following drivers:

  • Lack of tools and services that meet their needs.
  • Recommendations for new investment ventures from friends and family.

Investor sentiment regarding hybrid advice models also differs.

  • Do-it-yourself investors find it difficult to get to grips with the evolutionary approach of hybrid boards. Often their personal interaction involves a less personalized conversation through a call center.
  • Full-service investors, meanwhile, are finding that their companies’ recent focus on technology development has increased their satisfaction with the digital channels now available to them.

The big takeaway: Studies point to a disconnect between investors and the techniques used by advisors and investment firms.

  • Increased technology wealth manager spending appears to have appeased full-service investors enough to maintain their loyalty. But these clients may find themselves falling short of their long-term financial goals.
  • Attrition appears to be a particularly high risk for young do-it-yourself investors— who will be quick to hand over their business to a new company if they believe that this company will provide them with the tools and training they need to grow financially.

Now more than ever, wealth managers must focus on personalization to cater for all types of investors.

Dolores W. Simon