Fidelity Ranks Highest in Advice-Seeking Segment; Charles Schwab Ranks Highest Among DIY Investors
While the full force of the great wealth transfer has not yet rained its bounty upon Millennials,1 the growing ranks of these younger self-directed investors will transform the customer experience that firms must deliver to build client loyalty and retain relationships over time. According to the J.D. Power 2019 U.S. Self-Directed Investor Satisfaction Study,SM released today, Millennial investors are currently notably less satisfied, less loyal and less trusting when it comes to their investment brokerages than are investors in older generational groups.
“What separates Millennial investors from previous generations is not just greater mobile usage; they’re actually approaching investing in a fundamentally different way,” said Michael Foy, Senior Director of Wealth & Lending Intelligence at J.D. Power. “For example, they are much more oriented to setting and working toward investment goals, and much less likely to believe that they can outperform markets with individual stock picking. The customer experience that firms deliver needs to reflect this evolution in priorities to build loyalty with this critical segment.”
Following are key findings of the 2019 study:
- Millennials less satisfied, less loyal and less trusting: Millennials have significantly lower levels of overall satisfaction with their investment firm than do Boomers. Among DIY2 investors, 6% of Millennials either “probably will” or “definitely will” switch investment firms during the next 12 months, vs. just 6.3% of Boomers. In the Seeking Guidance3 segment, 22.1% of Millennials vs. just 6% of Boomers responded similarly. Millennials in both segments also provide lower ratings for brand trust as well as in likelihood to refer their firm to others.
- Millennials more goal-oriented and embrace passive investing: Perhaps counterintuitively, Millennials are more likely to have investment goals than are Boomers (83% vs. 74%, respectively) and are more likely to embrace Exchange-Traded Funds and other passive instruments over individual stock selection. Even among DIYs, just 34% of Millennials vs. 50% of Boomers indicate they try to beat the market by making their own decisions on individual securities.
- Millennials want advice and guidance: Millennials have a strong interest in financial guidance, including seeking advice via digital means. Among Seeking Guidance investors, nearly half (61) of Millennials indicate interest in digital advice vs. just 28% of Boomers. Even among DIY investors, 51% of Millennials express interest vs. 23% of Boomers.
- Millennials more diverse and more educated: Across both segments, Millennial investors are significantly more likely to be female; more likely to have a college degree; less likely to be white; and less likely to be married. Firms’ ability to capture individual client circumstances and preferences to personalize the experience becomes more essential as clients become more diverse and expectations increase based on the personalization that they experience in other industries.
The U.S. Self-Directed Investor Satisfaction Study, now in its 17th year, evaluates key satisfaction drivers and firm performance for both those seeking guidance (i.e., investors who don’t have a dedicated financial advisor but do have access to interact with a registered investment professional) and true DIY investors (those who do not interact with professional advisors).
Fidelity (807) ranks highest in self-directed investor satisfaction among investors seeking guidance. Vanguard (806) ranks second and Charles Schwab (804) ranks third.
Charles Schwab (805) ranks highest in self-directed investor satisfaction among DIY investors. Vanguard (800) ranks second and Merrill Edge (770) ranks third.
The U.S. Self-Directed Investor Satisfaction Study measures self-directed investors’ satisfaction with their investment firm based on performance in a number of factors. The Seeking Guidance segment includes eight factors (in order of importance): firm interaction; account information; investment performance; information resources; financial advisor; commissions and fees; product offerings; and problem resolution. The DIY segment includes seven factors (in order of importance): interaction; account information; commissions and fees; product offerings; information resources; investment performance; and problem resolution.
The 2019 study is based on responses from 5,418 investors who make all their investment decisions without the counsel of a personal financial advisor. The study was fielded from November 2018 through January 2019.