Wealthy Like Ed Jones, Charles Schwab

In the retail brokerage and financial advisory businesses, the customer, as they say, is king. After all, the vast majority of new business is driven by referrals, and referrals come from happy clients. So it might interest you to know how the high-net-worth ranked their overall customer experience at various firms in the industry.

In the retail brokerage and financial advisory businesses, the customer, as they say, is king. After all, the vast majority of new business is driven by referrals, and referrals come from happy clients. So it might interest you to know how the high-net-worth ranked their overall customer experience at various firms in the industry.

According to an annual study by the Luxury Institute, among full-service firms, Edward Jones took top honors, outranking all of its peers, with a score of 8.43, and Merrill Lynch came in last, with a score of 7.68. Among so-called “premium brokers,” Charles Schwab ranked first with 7.66. But the biggest surprise on the survey may be how Ameriprise fared. It scored dead last in 2006, but made a comeback this year, ranking second with 7.60.

“There are no magic formulas here. Rather, firms have to execute on the fundamentals of service,” says Milton Pedraza, CEO of the Luxury Institute, about the results. “The cheapest and most cost effective things [firms] should be doing is delivering the fundamentals of service, like trust, competency and honesty. Those are the things that will take a company to the top.”

Sure, the overall firm ratings are not vastly different, but they do reflect the responses of a sizeable sample: 1,650 consumers that were at least 21 years of age and had a minimum gross household income of $150,000. The final scores were compiled using respondents’ ratings on what the Luxury Institute calls the three main “pillars” of brand experience: effectiveness, personnel and environment. The study also rates the firms on incidence and resolution of problems, whether the broker is worthy of a price premium, client loyalty and willingness to recommend the brand to others.

Full-Service Brokers

Edward Jones outranked its peers in each of the three “pillar” categories with ratings above eight, and it came out on top among both customers with net worth of under $1 million and those with over $1 million. But oddly enough, among full-service brokerages, the firm was the one least used by survey respondents.

What makes the wealthy like Ed Jones so much? For one thing, its personnel were deemed to be substantially more enthusiastic, polite, courteous and trustworthy than those at all other full-service brokerages and premium brokerages. The firm was also thought to have a very low incidence of problems (1 percent versus a group average of 11 percent).

Conversely, though Merrill Lynch won the lowest overall score, it is the firm that is most often used by respondents. That said, Merrill seems to do quite a bit better with the fairer sex: it was ranked a full point higher in overall customer satisfaction by women than by men. The firm got an especially low score in the category rating whether its services are worth the price premium paid. Smith Barney, which came in second place overall, scored highest in terms of the appropriateness of its pricing.

Premium Brokers

On the “premium brokers” end (again), Charles Schwab took the crown. “Now that it’s sold U.S Trust and is back to serving the mainstream and affluent client, the firm is able to focus again, and to give much better customer experience. Knowing who you serve bodes well for customers,” Pedraza says of their ratings. Schwab scored especially high on effectiveness, personnel and client retention ratings.

Though Amerirprise came in second place among premium brokers, its ratings were something of a mix. It came in second place overall, and scored significantly higher than peers in the categories of effectiveness, personnel and environment. However, it won surprisingly low loyalty, price value and willingness to recommend ratings. But that may be because some of the developments in service are relatively new, considering the firm was spun off from American Express just two years ago. “It wasn’t that long ago that they went public, so it’s not surprising that it had some impact on morale and service levels,” says Barry Mendelson, founder of Capital Market Consultants in Milwaukee. “But now things have moved beyond the spin-off from American Express and [its employees] are feeling more comfortable with their roles and position with the company,” he says. The number of wealthy clients using the firm has also increased slightly to 5.2 percent from 4.6 percent last year.

On the losing end of the premium brokers are the online brokerage firms T.D Ameritrade and E*Trade. Customers of these firms are less likely to interact with people in branch offices—which may be the reason both were the lowest rated brokerage brands by a significant margin. “Even though online investors don’t expect as much interaction with people, it’s still an important factor in financial services industry,” says Pedraza. “The reality is if these firms don’t have [customer service] people online, on the phone or face-to-face, our opinion is you’re probably going to get a lower score,” he adds.
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