TORONTO--(BUSINESS WIRE)--Risk of client attrition at wealth management firms in Canada is on the rise and could spike with the upcoming Total Cost Reporting (TCR) regulation, according to the J.D. Power 2024 Canada Full-Service Investor Satisfaction Study,SM released today.
The regulation is intended to make the cost of owning investment products more transparent to investors in Canada. While few Boomers say they plan to switch wealth management providers, the same is not true for younger clients. A notable 13% of Gen X1 clients and 22% of Millennial clients say they are considering switching wealth management firms in the next year. They cite high costs as their top reason, which makes the TCR regulation all the more important.
“Younger clients are already asking questions about the value of their advised relationships,” said Craig Martin, executive managing director and global head of wealth and lending intelligence at J.D. Power. “The forthcoming regulation is only going to magnify the focus on fees and other costs for the client base. Firms must prepare to communicate their value, not just in terms of yields and returns, but also in terms of the broader benefits an advisor offers. Being proficient in the technical know-how of wealth management is a base requirement, not a point of differentiation. To create client relationships that enable healthy organic growth over time requires a more meaningful connection that many say is missing.”
Following are some key findings of the 2024 study:
- Failure to plan is planning to fail: The study finds that 43% of Millennial full-service investors say they do not have a documented financial plan. Trust scores are significantly higher (+107 points on a 1,000-point scale) among Millennials who say they have a financial plan than among those who do not.
- Transactional troubles: More than half (54%) of advised client experiences fall into the transactional category on the J.D. Power advice continuum.2 This group already has lower loyalty and advocacy levels and added focus on costs and fees will only exacerbate the problem. Delivering truly personalized guidance that addresses clients’ unique goals and challenges is vital to start moving them out of transactional relationships.
- Younger affluent clients have alternatives lined up: Although a typical barrier to switching firms is having to start a new relationship, nearly one-third (32%) of Millennials who have an advisor also have a second investment relationship. This figure jumps to 44% among wealthy Millennials with $1 million or more in assets.
Study Ranking
National Bank Financial ranks highest in overall investor satisfaction with a score of 716. Raymond James (714) ranks second and Edward Jones (697) ranks third.
The Canada Full-Service Investor Satisfaction Study, now in its 19th year, measures overall investor satisfaction with full-service investment firms in seven dimensions (in order of importance): trust; people; products and services; value for fees; ability to manage wealth how and when I want; problem resolution; and digital channels. The 2024 study is based on responses from 4,931 investors who work directly with a dedicated financial advisor or team of advisors. The study was fielded from October 2023 through January 2024.
For more information about the Canada Full-Service Investor Satisfaction Study, visit https://www.jdpower.com/business/jd-power-canada-full-service-investor-satisfaction-study-award-information.
See the online press release at http://www.jdpower.com/pr-id/2024035.
About J.D. Power
J.D. Power is a global leader in consumer insights, advisory services, and data and analytics. A pioneer in the use of big data, artificial intelligence (AI) and algorithmic modeling capabilities to understand consumer behaviour, J.D. Power has been delivering incisive industry intelligence on customer interactions with brands and products for more than 55 years. The world's leading businesses across major industries rely on J.D. Power to guide their customer-facing strategies.
J.D. Power has offices in North America, Europe and Asia Pacific. To learn more about the company's business offerings, visit JDPower.com/business.
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1 J.D. Power defines generational groups as Pre-Boomers (born before 1946); Boomers (1946-1964); Gen X (1965-1976); Gen Y (1977-1994); and Gen Z (1995-2006). Millennials (1982-1994) are a subset of Gen Y.
2 The J.D. Power Advisor Experience Continuum measures the efficacy of advice delivery on a scale extending from transactional to comprehensive. It categorizes performance into three tiers—transactional, goals-based and comprehensive—thereby indicating a progression from basic to exceptional service.
