Levels of satisfaction among independent advisors have improved by a considerably larger extent than among employee advisors over the past two years, according to a new study.

Levels of satisfaction among independent advisors have improved by a considerably larger extent than among employee advisors over the past two years, according to JD Power and Associates' 2013 US Financial Advisor Satisfaction Study.

Since 2010, satisfaction levels have risen by 12 points (on a 1,000-point scale) among employee advisors, but by 29 points among independent advisors, the survey found.

The firm examined what it believes are nine key drivers of employee advisor satisfaction (in order of importance): firm performance; compensation; contact; people; job duties; work environment; products and offerings to clients; technology; and services and support offered to financial advisors.

It also looked at eight drivers of independent advisor satisfaction (again in order of importance): firm performance; people; contact; job duties; compensation; technology; products and offerings to clients; and services and support offered to financial advisors.

"Generally speaking, individuals are happier when they are successful, and a financial advisor's success is heavily dependent on the relationships they are able to develop with their clients," said Craig Martin, director of investment services at JD Power and Associates.

He added: "The brand image of the firm an advisor works for or is affiliated with may have a direct impact on their client relationships and, as a result, may strongly influence advisor satisfaction. Advisor satisfaction is based on more than just firm brand image, but when client relationships are potentially harmed, it raises questions about the risks and rewards of being affiliated with a firm."

Dedication

The firm said that the majority of advisors fell into one of two categories: those with high satisfaction and who are "dedicated" to their investment services firm or broker-dealer, and those who are less satisfied and "indifferent." A total of 45 per cent of employee advisors and 44 per cent of independent advisors are dedicated, while 36 per cent of employee advisors and 23 per cent of independent advisors are indifferent.

Unsurprisingly, dedicated advisors either "definitely will" or "probably will" remain with their current firm over the next year. Reasons for this included because they believe "the firm is a good place to work; has strong cultural values and beliefs; and is focused on the customer rather than on the bottom line," JD Power and Associates said.

Meanwhile, those advisors who said they were "indifferent" were not as satisfied with their firm or broker-dealer but are still there because "they have a financial incentive to stay; don't have a good reason to leave; or are under contract and can't leave."

"With indifferent advisors, because there is no strong connection to their firm, they are likely to be more open to discussions and opportunities with another firm or broker-dealer if the right offer comes along," Martin said. "Additionally, when an advisor leaves, they usually take a large percentage of their clients with them." 

He added: "That means the firm or broker-dealer not only loses an advisor, but also customers, and one of their competitors gains both. Given this combined effect, there's potentially a substantial positive economic impact on the firms or broker-dealers that are able reduce their number of indifferent employee advisors and improve advisor retention."

Improving advisor satisfaction and increasing loyalty

According to the firm, one of the key areas of advisor support is "problem prevention and resolution," which it said starts with a "positive corporate culture." This includes being honest and focusing on customers, as well as providing advisors with the tools and support they need.

The survey revealed that over 40 per cent of advisors had experienced a problem such as a computer issue or paperwork error in the past 12 months. 

"Limiting the number of problems and ensuring effective problem resolution processes are in place are key components of advisor satisfaction," Martin said. 

The survey involved some 2,500 US financial advisors and was conducted between October 2012 and February 2013.

JD Power and Associates is a global marketing information services firm.