In 1968, James David Power III struck out on his own to form J.D. Power & Associates. It was an unusual career move for the time. At 36 years old, with a mortgage and three kids, Dave Power had a secure job as director of corporate planning at McCullough Corp., makers of chainsaws and Weed-Eater.
Nonetheless, Power had an ongoing passion for market research, and decided to form his own market research firm. (In the early years, Power and his wife Julie tabulated the results of their customer surveys around their kitchen table.)
J.D. Power & Associates began as a publisher of independent customer surveys that focused on the automobile industry. Power’s big break happened in 1971, when his customer research uncovered a flaw in Mazda’s rotary engine. Writing his first-ever press release on a yellow pad of paper, Power detailed unreported problems by Mazda car-buyers. 24 hours later, the press release hit the front page of the Wall Street Journal…and (as they say) the rest is history.
By 2005, J.D. Power & Associates had grown to 700+ employees with annual sales of $150 million. Dave Power had earned the reputation as the auto industry’s “Mr. Quality.” During that year, Power decided that the time was right to step aside, and sold his company to McGraw Hill. Terms were undisclosed.
For the past 8 years, J.D. Power & Associates have branched out to the financial services industry and have provided ratings for full-service investment firms. In the latest survey, “2010 U.S. Full Service Investor Satisfaction Study” released on July 19, 2010, three firms distinguished themselves with superior ratings: Edward Jones, RBC Wealth Management, and LPL Financial. Edward Jones had the highest investor satisfaction, averaging 769 on a 1,000 point scale.
The study also finds that advisors who perform certain practices see a positive impact upon client satisfaction and the overall investment experience. These activities include:
- Fostering engaged client/advisor relationships that involve the development of an investment strategy,
- Periodic review of investment objectives,
- Regular communication around, and reasons that explain, investment performance,
- A clear explanation of fees and commissions.
The study also finds that investor satisfaction has a substantial impact upon several other important criteria: share of wallet, more new client introductions, and higher levels of loyalty and retention.
Also notable is that investors’ positive sentiment regarding their own investment firms have decreased. Overall, an increasing number of investors believe that their firm is more focused on profits…as opposed to them.
The 2010 study is based upon responses from 4,460 investors who make some or all of their investment decisions with an investment advisor. The study was fielded in May 2010.
There are no real surprises in the Investor Satisfaction Survey. Financial advisors know they need to engage their clients and keep them happy. What is relevant is yet another reminder that many clients remain dissatisfied with their current firm. What about yours? Here are some coaching questions that come to mind:
- What are you doing to effectively engage your clients on multiple levels, so they remain satisfied with your level of service?
- Why not communicate the survey’s findings to begin an open dialogue with them about you and your practice?
- What is your plan for acquiring new clients in today’s marketplace?
- How else might you use the survey’s findings?
You have the “power” to ensure all your clients are satisfied; don’t relinquish that power to someone else.
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