Data & Research November 20, 2008

Winners, Losers in Fund Distributor Battle for Investor Loyalty

Some unlikely distribution firms have managed to step into the crisis and increase loyalty among affluent investors, according to Cogent Research.
Reported by

Meanwhile, some of Wall Street’s biggest broker/dealer players have experienced precipitous drops in the proportion of their affluent clients who remain loyal, according to a release from Cogent. Cogent compared customer loyalty ratings of the top 23 distribution firms in October this year with their rating two years ago.

The overall average score is 40, which isn’t too far off from the average figure in 2006 (36). However, the rank of firms has definitely changed. The highest scorer was USAA (maintaining its number 1 spot), at 86; and the lowest score was Bank of America Securities, which received the only negative score at -2. Scottrade barreled ahead to the number 2 spot up from the number 17 spot, pushing Vanguard out of the “Leaders’ category.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Among the 10 firms ranked as “Leaders,’ three firms have made substantial gains over the past two years. Specifically, TIAA-CREF, ING, and Raymond James made double-digit gains in investor loyalty, upping their rankings from numbers 6, 20, and 21 to numbers 4, 6, and 12, according to Cogent.

Firms that have suffered the greatest losses in loyalty include Bank of America Securities, Merrill Lynch, and Wachovia. These firms all find themselves in the “Drifters’ category this year, having experienced double-digit declines in loyalty. Although sustaining smaller losses than some of their counterparts, three firms dubbed “Players’ have also taken hits in loyalty, including Ameriprise, UBS, and JPMorgan Chase, Cogent said.

“While performance continues to be the primary driver of loyalty—and certainly can’t be dismissed—this year, we see that the big differentiator lies in investor perceptions of a firm’s financial stability’ said Christy White, founder and principal of Cogent Research, in the release.

Among different channels of fund distributors, there were some differences. Online providers, particularly the discount firms, including Scottrade, ING, and TD Ameritrade have all made gains in client loyalty. Firms in the bank channel are all suffering sizeable losses in loyalty—with the exception of Wells Fargo—which is not only the top performing bank when it comes to client loyalty, it managed to increase its score and improve its ranking to number 10, according to Cogent.

According to Cogent, Morgan Stanley, “one of the few pure wirehouses left standing,’ has improved its score and “is looking very strong’ in the number 13 spot. Edward Jones is still the top ranked regional/independent firm (ranked number 5 across all firms); however the major strides made by Raymond James have closed the gap between the two firms substantially.

The study, which will be released next month, was based on the Net Promoter Score (NPS) of the firms. The NPS is based on a national study of 4,000 affluent American investors.

The Markets November 20, 2008

PSAs Push Younger Workers to 'Feed the Pig'

A new series of print and broadcast public service announcements are urging younger Americans to 'Feed the Pig.'
Reported by
That’s right, Feed the Pig is a new national campaign of the American Institute of Certified Public Accountants and the Advertising Council is encouraging Americans age 25 – 34 to spend wisely and save for the future.
“People in this age group are involved in major life changes,’ said Carl George, chair of the National CPA Financial Literacy Commission. “They’re launching careers, buying homes, getting married and having children. All these events involve major expenses, which makes saving difficult, especially in a hard economic time like the one we’re now experiencing. But there are simple things they can do, such as paying more attention to how much they spend on discretionary items. Spending within your means is itself a form of saving.’
The new PSAs can be viewed at the campaign website, www.feedthepig.org, which features savings tips, interactive tools and viral components. Feed the Pig additionally employs new media, including:
  • weekly e-mail savings tips,
  • podcasts,
  • text messages, and
  • Facebook and MySpace pages for Benjamin Bankes, the campaign icon that evokes childhood memories of the traditional piggy bank.
A new study commissioned by the AICPA indicates that between 1985 and 2005 (the most recent year for which statistics are available), the targeted age demographic saw its median debt skyrocket by 44%. For every dollar of assets, the study found, this group is carrying 70 cents in debt, more than double the amount carried by older age groups – a trend driven by easy access to credit, according to a press release.
The study, conducted by Christopher Thornberg, PhD, of Beacon Economics in Los Angeles, additionally found that the median net worth for this group declined by 31% during the same period, a figure that excludes the value of their homes. In contrast, the median net worth for Americans 35 – 64 grew by 28%.
The AICPA and the Ad Council originally launched Feed the Pig in 2006. The Ad Council says that individuals who have seen or heard a Feed the Pig PSA are more likely to change their financial behavior for the better. For example, 37% of individuals who have seen or heard the PSAs say saving for their future is more important than buying things they want now versus 20% that have not seen or heard an ad.
Feed the Pig serves as an extension of 360 Degrees of Financial Literacy (www.360financialliteracy.org), an effort by the CPA profession to educate Americans on how financial issues affect them at all life stages, beginning with childhood and extending through retirement.

«