Canadian investors have diversified their portfolios among more dealers: study

Date: Wednesday, June 16, 2010
Author: Investment Executive

Investor satisfaction has increased considerably from 2009 as the market recovers, but investors are taking a more cautious approach by diversifying their portfolios among more investment firms, according to a study released Tuesday by J.D. Power and Associates.

The 2010 Canadian Full Service Investor Satisfaction Study finds that overall satisfaction with full service investment firms averages 735 on a 1,000-point scale, increasing by 42 points from 693 in 2009. However, only 14% of investors strongly agree that they feel loyal to their primary firm, compared with 21% in 2009. Similarly, only 13% of investors report that they are strongly committed to their primary firm, compared with 20% in 2009. In addition, the percentage of investments held with an investor’s primary firm has decreased slightly to 78%, on average, from 81% in 2009.

Although the Canadian economy has demonstrated signs of recovery, the study finds that fewer investors believe that Canada is out of the recession -- 53%, compared with 55% in 2009. Similarly, 43% believe that the Canadian stock market has bottomed out, while 58% said the same in 2009.

“As the economy recovers, investors are taking a more cautious approach, and are exploring their investment choices and using more firms to manage their assets, rather than keeping all their eggs in one basket,” said Lubo Li, senior director and leader of the financial services practice at J.D. Power and Associates, Toronto. “As the industry provides investors with more choices, the marketplace has become more competitive and clients have become more demanding. Understanding and meeting investor needs and expectations is key to ensuring loyalty.”

Now in its fifth year, the study provides benchmarks for investor satisfaction that allow individual investment institutions in Canada to evaluate how they compare to competitive firms. Seven factors are used to evaluate overall investor satisfaction with full-service investment firms and financial institutions that offer wealth management and private banking services:

- investment advisor;
- account offerings;
- investment performance;
- account information;
- fees;
- website; and
- problem resolution.

Raymond James ranks highest among full-service dealers

For a second consecutive year, Raymond James Ltd. ranks highest in investor satisfaction among full-service investment firms with a score of 759. Raymond James performs particularly well in the investment advisor, account offerings, investment performance and fees factors. RBC Dominion Securities follows in the rankings with a score of 744, performing particularly well in account information. Edward Jones ranks third with a score of 743.

“Investor satisfaction among bank-affiliated brokerage firms has improved substantially, with particular improvements in the areas of investment advisor and account information,” said Li. “These improvements indicate that bank-based firms are taking advantage of their financial strengths and existing relationships with clients to enhance the overall experience at the enterprise level.”

The study is based on responses from 6,500 investors who use advice-based investment services with financial institutions in Canada. The study was fielded in May 2010.

Headquartered in Westlake Village, Calif., J.D. Power and Associates is a global marketing information services company operating in key business sectors including market research, forecasting, performance improvement, Web intelligence and customer satisfaction.