Robinhood led in new online brokerage account openings in 2020, but Vanguard delivered the best customer satisfaction to both do-it-yourselfers and customers seeking guidance, according to the J.D. Power’s new “2021 U.S. Self-Directed Investor Satisfaction Study,” released today.
More than 10 million mainstream investors opened new brokerage accounts in 2020, but the surge in customers also created more than double the customer service problems in the past year, with 11% of all do-it-yourself investors and 12% of those seeking guidance reporting problems. Website issues, processing and trade execution failures and account statement errors bedeviled customers the most, the study found.
“One of the things we found that was surprising and concerning, despite the increase in new accounts and trading volume, was the doubling of customer problems year over year,” Michael Foy, senior director and head of wealth intelligence at J.D. Power told Financial Advisor Magazine.
“The other thing that we didn’t know what to expect and that for years brokerage firms have been asking about Robinhood…what is their experience like compared to theirs…so for first time we have data from Robinhood clients and it was interesting to see how they excel in some areas and fall short in others,” Foy added.
Vanguard ranked highest in self-directed investor satisfaction among do-it-yourself investors with a 736 rating. Charles Schwab (727) ranked second, T. Rowe Price (721) third, Robinhood came in fourth, DIY Average (707) fifth and Fidelity (706) sixth, according to the responses from 4,895 investors who make their investment decisions without input from a full-service dedicated financial advisor. The survey was fielded from December 2020 through February 2021.
Among online investors seeking guidance, Vanguard (736) ranked highest in self-directed investor satisfaction. T. Rowe Price (705) ranked second and Charles Schwab (702) third, with Fidelity (696) coming in fourth and DIY Average (602) fifth.
Robinhood outpaced every other competitor by double digits when it came to adding new investors, nabbing 27% of new accounts, followed by Fidelity (20%), Charles Schwab (16%), TD Ameritrade (11%), E*Trade (8%) and Vanguard (7%). Some 37% of DIY investors added money to their online brokerage accounts last year, while 33% of those seeking guidance added money.
Should advisors be worried? Do bespoke broker-dealers worry about cannibalizing their share of the advisor market?
“I think firms do worry about it to some extent about the advisor market,” Foy said. “Whether broker-dealers are improving their digital platforms to provide immediate access to the markets and portfolio rebalancing and tax harvesting, it underscores the fact that the value proposition of the financial advisor has to go beyond portfolio management and investment selection to help clients holistically define and meet goals. Advisors who define their proportion more broadly will not easily be replaced, but those who don’t may struggle,” Foy said.