This surprising factor is driving independent advisor job dissatisfaction

A new study by J.D. Power has found a drop-off in company leadership is driving job dissatisfaction among independent financial advisors.

“What we saw is things like leadership and culture, professional development and, to a lesser degree, operational support was down year-over-year, and those were kind of the key drivers of declining satisfaction on the independents,” Craig Martin, executive managing director and head of wealth and lending intelligence at J.D. Power, said.

On the other hand, job satisfaction among employee advisors increased, likely due to the stability of the larger firms that employ them. However, in either case, businesses struggling with employee dissatisfaction were encouraged to strengthen their communication to improve outcomes.

“I think a really critical piece for a successful leadership team is how they communicate, how they set expectations and manage those ongoing,” Martin said.

Shifting job satisfaction

Independent advisors normally have higher rates of satisfaction than employee advisors. However, J.D. Power’s 2024 U.S. Financial Advisor Satisfaction Study shows it’s now the opposite.

Job satisfaction among employee advisors, who are employed by a major company, increased by a significant 49 points year-over-year, jumping to 637 on a 1,000-point scale.

On the other hand, satisfaction among independent advisors, who may receive back-office support from a firm but essentially run their own business, dropped 15 points to 611. Just 46% of independent advisors said they “strongly agree” that their firm is headed in the right direction, down from 54% in 2023.

Additionally, 41% of independent advisors who are more than two years away from retirement indicated they may not stay with their current firm in the next one to two years, while 34% of employee advisors said the same.

This is crucial because, according to J.D. Power’s data, “intended attrition equals real attrition” and most advisors who say they plan on leaving the firm will do so. However, Martin said the results do not necessarily suggest more independent advisors will look to become employee advisors but that large firms may be losing their appeal.

Most independent and employee advisors told J.D. Power that if they couldn’t work for their current firm anymore, they would either join a small firm, start their own small firm or retire altogether.

“It’s a signal that even the big firms of any kind may not be as attracted to some of these folks,” Martin said. “They’re starting to look more towards smaller firms and boutiques, RIAs, things like that.”

Instability and lack of support

Recent market growth, consolidation, acquisitions, rebranding and similar changes among independent firms are contributing to a falloff in leadership, according to the survey.

“In aggregate, what that means is that firms are taking on a lot more people, and they’re trying to serve them through those same means and mechanisms they have in the past. What we saw is things like leadership and culture, professional development and, to a lesser degree, operational support was down year over year,” Martin said.

Some of the independent employees who responded to J.D. Power’s survey specifically mentioned that their firm seemed more focused on adding brands and growing rather than helping the individual advisor or their business.

In contrast, he pointed out that large firms that employ advisors have seen more stability in the last few years. This has allowed them to improve metrics that drive higher job satisfaction, such as compensation, perceptions of technology and quality of support.

Communication is key

By maintaining strong lines of communication and affiliating with advisors whose goals and views align with theirs, financial firms can improve employee satisfaction, Martin added.

This is especially so for independent firms as they go through “inevitable” changes. Whereas, for larger firms, it’s more about curating an ideal culture and aligning with advisors who match that.

“Anytime you think about good change management, at its heart, one of the most vital things is around communication, and it’s a couple of different things. One is acknowledging what advisors are saying and the workforce is saying, what are their preferences and then reinforcing what’s the value and benefit,” he said.

Even something as simple as engaging with advisors, demonstrating a level of concern and care and “being in the market” with them can make a pivotal difference, Martin said.

“I think that’s more important than maybe some should realize, because it is really a demonstration that you’re listening, you’re clear on what the relationship is and you’re continually reinforcing the actions that are being taken to support that. So, it could be operational support, it could be technology investment,” he said.

J.D. Power is a data analytics, consumer insights and advisory services firm that uses big data, AI and algorithms to evaluate consumer behavior. Their 2024 U.S. Financial Advisor Satisfaction Study surveyed 4,072 American advisors between January and May 2024.

 

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