Investors Rank “Clear Pricing” and “Low Fees” No. 1

Despite Desire for Fee Clarity, Less Than One in Four Understands How Primary Provider Earns Money

(Rye, NY) – Investors rank “clear and understandable pricing” as their No. 1 Investor Want for investment providers – yet less than one in four has a good understanding of how their primary provider earns money – in a survey of approximately 5,500 U.S. households nationally by Hearts & Wallets, the preeminent financial research resource for understanding consumer savings and investing needs and behaviors. Americans grew more demanding for all the Top 10 Investors Wants in 2014, with fee clarity shooting up four points from 2013 to share the top spot with low fees in the annual survey:

Top 10 Investor Wants – Percentage Who Rank as Extremely Important in 2014

  • 1. Fees are clear and understandable 52% 1. Has low fees (tie) 52%
  • 2. Explains things in understandable terms 50%
  • 3. Is unbiased, puts my interests first 49%
  • 4. Has made me money 48%
  • 5. Has well-trained staff 46%6. Is easily reachable by telephone 44%
  • 7. Provides clear, useful statements 43%
  • 8. Understands me and shares my values 40%
  • 9. Investment ideas are knowledgeable, timely and tactical 39%
  • 10. Is proactive when market changes/when I’m losing money 38%

Top firms
Consumers ranked the two firms they do the most business with in each of the Top 10 Investor Wants. Edward Jones ranks among the best performers in nine out of the Top 10 Investor Wants. USAA ranks among the best performers in seven out of Top 10 Wants. Ameriprise investors rank the firm as a best performer in five of the Top 10 Wants. Merrill Lynch (excluding Edge) places as a best performer in four of the Top 10 Wants. Charles Schwab, Vanguard and Wells Fargo Advisors investors rank their firms as a best performer in two of the Top 10 Wants. Morgan Stanley Smith Barney, Scottrade and TD Ameritrade all receive a Top 10 Wants best performer ranking.

Fee clarity shot up five points to tie for first with “low fees” in the annual competitive assessment of consumer wants. Hearts & Wallets’ Competitive Intelligence: What Investors Want and How Stores Perform study examines full-service, in-plan, self-service and hybrid investment platforms, assessing share of wallet and other performance metrics by age/asset segments. Hearts & Wallets tracks competitive position on three levels of pricing strategy – low or premium pricing, pricing clarity, and consumer perception of pricing in how the firm earns money. Some investors seek specific services and are willing to pay. Others are focused on low cost.

Investing as consumer choice
“Investing is becoming a consumer choice,” Laura Varas, Hearts & Wallets partner and co-founder, said. “Before being able to judge whether fees are high or low, investors have to know what the fees are. Many financial services firms don’t make this easy. People have to understand the value of the purchase, just like any other buying decision. The financial services industry has a ways to go to empower choice, but there are some bright spots.”

Overall, Americans are more fee savvy than they used to be. Only 27 percent saying they “don’t know” the price paid for investment products and service, improving from 31 percent in 2013. 41 percent of consumers say they pay nothing since “the firm is paid through products I own.” For fee clarity, Ameriprise and Edward Jones are the clear leaders, with the firms in a statistical tie based on sample size . Merrill Lynch and Wells Fargo ranks among top performers in the full-service firm category. In the employer-sponsored category, TIA-CREF ranks among the top performers for “explains things in understandable terms.”

Firms with high percentages of customers who know the price they pay are E*Trade, Scottrade, Charles Schwab and Morgan Stanley. Self- and full-service platforms perform best. Hybrid models have mixed results with bank and employer-based platforms performing poorly. A positive trend is the increasing number of customers who say they pay a “percentage of assets” across all asset segments, doubling from 9 percent in 2013 to 18 percent in 2014. Even here, a common misperception exists that a flat fee is paid for full-service firm services. “In the future, people will better appreciate the value of what they’re buying at the prices they are paying,” Chris Brown, Hearts & Wallets partner and co-founder, said. “The decision is not just about pricing and returns.

Service dimensions factor into choice

If you want a financial provider with a really good website, consider Fidelity. If you want a firm that excels at explaining things in understandable terms, consider Edward Jones. If you want a provider who is easy to reach on the phone, think about USAA or Ameriprise.”  The research demonstrates the importance of low fees differs by firm. Low fees may be a key attribute for a self-service firm’s customers. A full-service firm’s customers may be wiling to pay more, if offered enhanced or more service dimensions. Hearts & Wallets predicts pure retail investing self- and full-service competitive sets will clarify pricing most quickly since banks and employer based-based retirement providers must deal with additional pricing layers.

Hybrids with employer businesses face similar challenges. High marks to financial pros Two out of three Americans now use a financial professional. Satisfaction with financial professionals increased from last year in all service dimensions with the biggest jump seen in reliability, going from 55 percent in 2013 to 68 percent in 2014. “Consumers give financial professionals higher marks all round,” Brown said. “This is probably a result of the bull market, their improved portfolios as well as potentially lower expectations.”


About the Hearts & Wallets Study Methodology Competitive Intelligence:
What Investors Want and How Stores Perform analyzes attitudes and behaviors of investor lifestages from age 21 through post-retirement and is drawn from the Hearts & Wallets Investor Quant (IQ) Database. The IQ database platform serves as the engine for Hearts & Wallets annual reports as well as emerging trend analysis and consists annually of more than 2 million data points from 85 families of savings and investment questions asked during 40-minute interviews of 5,500 U.S. households. The integrated database engine now consists of more than 30,000 U.S. households over five years.

About the Hearts & Wallets®
Hearts & Wallets LLC is the preeminent financial research resource for understanding savings and investing needs and behaviors of American households. More than half of the top 10 retail financial services firms, in terms of assets under management and investors served, subscribe to the Hearts & Wallets Investor Quant (IQ) database engine platform with data on 30,000 U.S. households over five years. The firm’s integrated research platform combines consumer marketing and strategy frameworks with a deep, practical understanding of how the investment, retirement and banking industries function. Hearts & Wallets grows financial services client businesses by illuminating new, smart ways to truly help American savers and investors. Clients better understand the unmeet needs of distinct population segments, improve their products and services, gain a powerful competitive edge, and ultimately, enhance consumer lives. The company is headed by the two of the leading research experts in retirement market trends for the financial services industry, Chris J. Brown and Laura Varas. Their studies and conferences are must-have resources for retirement industry strategists, product managers and marketing and sales executives. For more information, visit