In Practice May 2, 2007

Happiest Advisers Found at Edward Jones

Edward Jones ranks highest among 10 financial investment firms in satisfying their financial advisers, receiving particularly high ratings from advisers in support, people and firm performance.
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Conducted by J.D. Power and Associates, the 2007 Financial Advisor Satisfaction Study measured satisfaction by examining seven factors: support (specifically satisfaction with sales, technology and compliance support, and training and resources), firm performance, compensation, people (specifically satisfaction with co-workers, back-office operations and immediate supervisors), products and offerings, work environment, and job duties.

The industry average was 739 on a 1,000-point scale and Edward Jones ranked first, garnering a score of 892 points, followed by Linsco/Private Ledger with 880 points (doing particularly well in products and offerings, work environment, job duties and compensation). A.G. Edwards ranked third overall receiving 822 points, followed by Raymond James receiving a score of 804, and Merrill Lynch rounds out the top five with a score of 766. The rest of the top 10 were Ameriprise Financial Services (717), Morgan Stanley (707), Citigroup Global Markets (Smith Barney) (701), Wachovia Securities (689), and UBS Financial Services (685).

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Although compensation is commonly thought to be the most important component in adviser satisfaction, according to the survey the support factor has the most significant impact on the satisfaction of financial advisers. Unfortunately, J.D. Power found that advisers cite particularly low levels of satisfaction with their support, specifically with problem resolution, level of support staff, and compliance support. When it comes to compliance, the average adviser currently spends an average of 8.5 hours per week on compliance-related work and firms that can keep compliance activities to less than 5 hours per week tend to receive higher satisfaction scores from their advisers. The number of sales assistants assigned to work with an adviser also has an impact on satisfaction within the support factor; nearly 60% of advisers have no assistant and those with three or more sales assistants report satisfaction levels that are 114 index points higher on average than advisers with one or none at all.

The following firms were included in the study but were not ranked due to small sample size (in alphabetical order): AIG, Allstate Financial Services, American Family Securities, AXA Advisors, Banc of America Investment Services, Charles Schwab, Chase Investment Services, Citicorp Investment Services, Farmers Financial Solutions, Fidelity Brokerage Services, H.D. Vest Investment Services, ING Financial Partners, MetLife Securities, MML Investors Services, Northwestern Mutual, NYLIFE Securities, PFS Investments, Robert W. Baird, State Farm, and Thrivent.

From January to February 2007, J.D. Power and Associates surveyed 4,008 financial advisers who are registered with the National Association of Securities Dealers (NASD) online.

In Practice May 2, 2007

Perspective: Don’t Fall For the Experience and Intuition Trap

The first of seven ineffective habits of retirement plan advisers.
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No practice is immune to the variety of challenges that can stall profitable growth. Obstacles are set in your path from several angles testing your ability to address client expectations, your unique value, operations and personnel decisions, and your strategic focus.
In order to advance toward your ideal business vision, it is vital that you advance beyond your experience and intuition in rigorous pursuit of insight to improve your choices and decisions.
In working with hundreds of advisers, a key attribute that separates the top performers from the pack is a willingness to consistently question every aspect of their business.
Consider this example, often used to demonstrate the benefits derived from repeatedly questioning experience and intuition.

The Jefferson Memorial Parable

The Jefferson Memorial in Washington, D.C. was experiencing exceptional erosion and deterioration of cement. Intuition labeled the problem as seemingly unpreventable acid rain. Questioning that conclusion didn’t stop though. Further investigation indicated that the erosion was more likely due to frequent cleaning with a combination of water and detergent which had an adverse effect on the cement’s longevity.
Why did the Memorial need to be cleaned so frequently? Because it attracted an uncommonly concentrated amount of bird droppings.
Why was the Memorial such a target? It didn’t take much monitoring to determine that an unusually large number of sparrows were attracted to the Memorial.
Why so many sparrows? Because an abundant delicacy of spiders made for easy meals.
Why so many spiders? Because the food chain led them to a feast on insects called midges that splattered themselves on the Memorial. The midges reached an excited state at dusk, which was mating time. Their condition, combined with the attraction of lights that were turned on at the Memorial at dusk, caused the midges to fly out of control into the walls of the Memorial.
After challenging experience and intuition with progressive questioning, the solution was simple. Waiting one hour after sunset to turn on the lights caused the whole chain of events to cease and the Memorial didn’t need a daily power washing.
Many advisers fail to proceed to this level of questioning about their business. Instead of addressing core issues, they just keep washing the sparrows’ gifts off the Memorial.
You can take aim at your experience and intuition with more, and better, questions to gain the insight necessary to make actionable decisions about your business. If you stop digging, you may be susceptible to faulty assumptions. It’s when you think you have the answers that the most important learning actually begins.

How do you compete?

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Do you understand the strengths and weaknesses of competing advisers as much as you do your own? If you understand your market, you’ll be better able to develop a value proposition that resonates.

What impact does the makeup of your client base have?

 

Does the lowest half of your book of business create a drag on your service to your best clients? We regularly find that advisers generate less than 10% of total revenue from the bottom 50% of their client base. If you have low-revenue, high-effort clients, the fact is that your service to them may be subsidized by your higher-revenue clients. If you can effectively segment your service strategy, you may be able to dedicate more attention to your best clients, who are more likely to generate referrals to similarly good clients.

What do your clients and your target market need?

Have you verified that the services you offer are actually what the client desires? If you haven’t validated the desire for, or necessity of, your deliverables, you may be wasting time on endeavors that the client doesn’t appreciate.
A lack of needs-based understanding is what often leads to clients who require more effort than your service model allows you to effectively, and profitably, deliver.

How might external factors impact your business?

 

An honest assessment of threats and opportunities will help you prudently respond to issues that you can’t directly control.
How are technology and regulation impacting your business? Is the financial environment changing? Do new products or services demand your attention?

Do you have the right internal competencies and structure?

In many practices, people are in place and getting work done but they aren’t significantly aligned with the right objectives and empowered to vigorously pursue them.
Your ability to adapt internally to meet external challenges in the dynamic world of financial advice is critical to your long-term success.
Former General Electric CEO Jack Welch sums this up well. “When the rate of change on the outside exceeds the rate of change on the inside, the end is in sight,” Welch said.
I hope these thoughts spur questioning that leads you where you want to go. Next month, we’ll extend this conversation by examining the ineffective habit of complacency with your current situation.

 

Matt Smith is managing director of retirement services with Russell Investment Group. He is responsible for DC research and strategic development of Russell’s defined contribution investment management business in the United States. Smith joined Russell in 2001. Over his 20+ year career, Matt’s experience spans the spectrum of the qualified plan business. Prior to joining Russell, Matt held the position of vice president and general manager of ADP’s west coast retirement services operations.

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