Money, We Need to Talk: Investors Demand More Broker Contact

A broker investing in stocks
A broker investing in stocks

A new study by J.D. Power and Associates released Thursday shows some surprising trends in customer satisfaction with full-service brokers. Overall satisfaction is up. But satisfaction in key areas is down.

Sound confusing? David Lo, director of financial services for J.D. Power, and director of the study, explains: "We looked at customer satisfaction compared to before the recession, and the numbers are very similar. On the surface it seems as though things are back to normal," Lo says. "But dig a little deeper, and you'll see it's not exactly that."

The study measures seven characteristics that determine overall customer satisfaction, which shows a gradual increase over the past few years. But look closely at three "critical" factors -- financial adviser, commission and fees, and investment performance -- and it's clear that satisfaction is lower than it was in 2008.

Good communication is key in determining how pleased clients are with their brokers. The dip in satisfaction is not because advisers are communicating less with their clients than they did before the recession. Actually, it's quite the opposite.

What Really Matters to Investors

What has changed from 2008 until now isn't the overall level of contact between brokers and customers, but the expectations of how much contact is enough.

"During the recession, a lot of people were worried about their future. The advisers who were doing it right were out on the street, talking to people, reassuring them about their investments," Lo says. "Now, people are expecting that higher degree of touch as we continue down the road to recovery."

While good customer communication is important in all market conditions, it has become even more critical to satisfaction ratings when investors face extreme conditions.

'Investing Emergency? Please Hold.'

"When extreme things happen, obviously sentiment either goes way up or down at an industry level, but we still see a wide amount of variation within that," Lo says. The underperforming firms during normal times are still the lowest rated firms during market downturns.

Ultimately, firms that perform well for their clients, manage expectations, and provide excellent service -- in both bull and bear markets -- continue to see positive customer satisfaction levels.

Woe is the firm that fails to soothe customers' angst. That's because word travels fast these days.


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Investors Are Comparing Notes

Gone are the days of keeping mum about what your broker is doing for you. If customers don't feel as though their needs are being met, it's easy enough for them to compare notes with friends and colleagues.

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"The amount of information and transparency is much greater than it was in the past, which is ratcheting up expectations as well," Lo says. "There are thousands and thousands of people using social media. People are talking about what they're getting from their advisers, comparing strategy and pricing, things like that."

This accessibility has led to customers being generally better informed about their personal investment choices, the services their full-service brokers are providing, and at what rates. The study found that this is the case even among more mature, full-service brokerage customers, which slightly bucks the overall social media trend.

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Follow Motley Fool contributor Molly McCluskey on Twitter at @MollyEMcCluskey.