Although one of the threats to the wealth management industry has been the do-it-yourself investment business, new figures show that investors are unhappy with both the lack of communication they feel they endure and the clarity of the fee structures, according to a Self-Directed Investor Satisfaction Study by J.D. Power & Associates.
Self-directed investing account for $3.68 trillion of U.S. wealth management investment and has enjoyed a compounded growth rate of 19% in the past two years, according to Cerulli Associates. The new J.D. Power report suggests, however, that satisfaction with self-directed investment firms, such as E*Trade Financial and TD Ameritrade, has decreased from last year, with an overall satisfaction rating of 752 (on a 1,000-point scale), down from 768 in 2012.
J.D. Power attributes the decline in satisfaction largely to ineffective communication. Satisfaction falls by 72 points when website functions are difficult to locate and by 62 points when the firms don’t communicate enough or fail to communicate via investors’ preferred methods, whether by email, telephone or other means. According to the study, the share of investment firms that have communicated with investors reached out to investors twice or more in the last year fell to 34% from 39% in 2012.
Craig Martin, director of the wealth management practice at J.D. Power said. “It’s important to contact investors proactively and at the appropriate frequency based on investor preference.”
DIY investors’ understanding of their fee structure is also less satisfactory, with only 35% saying they “completely” understand the fee structure, compared to 39% in 2012.
Source J. D. Power & Associates/WealthManagement.com
