While recent investment
performance is the number one driver of mutual fund investor satisfaction,
consistent performance drives investor loyalty, according to a new national
study of 4,000 affluent Americans released this month by Cambridge, Mass.‐
based Cogent Research.
The Cogent Investor Brandscape: 2007 study examines three broad
outcomes associated with mutual fund customer experience – overall
satisfaction, likelihood to recommend, and future purchase intent – and the
underlying drivers affecting these outcomes.
Analysis of the findings reveals that the primary driver of overall investor
satisfaction is recent investment performance, however, the leading driver of
future investment and likelihood to recommend a mutual fund company to
friends and family is consistent investment performance, followed by company
investment philosophy and management style, and individual fund managers.
As perceptions of firms’ performance consistency rise, so too does client loyalty,
leading to improved client retention and profitability.
“This illustrates that while strong short‐term investment performance is
vital to attract new clients, in order to retain these clients and secure additional
investment dollars from them, fund firms must also communicate how their
investment philosophy and style will enable them to generate these returns
consistently over time,” said Chris Brown, managing director of the Wealth
Management Practice at Cogent Research LLC.
Among the top 38 mutual fund companies included in the study, the firms
that receive the highest ratings for consistency of fund performance among
affluent and high net worth investors are Dodge & Cox, American Funds, and
Schwab/Laudus Funds, with 78 percent, 66 percent, and 65 percent of investors
rating the firms 8 or higher on a 10‐point scale, respectively. Dodge & Cox also
ranks highest in recent investment performance with 77 percent of investors
rating the firm 8 or higher.
Using intent to recommend as a proxy for loyalty, Cogent computed
customer loyalty scores for the leading mutual fund companies. Based on their
intent to recommend the firm to friends and family, clients were grouped into
three categories – supporters, detractors and those that are ambivalent. The
mutual fund company loyalty scores are a variance measurement of client
supporters versus detractors.
The overall average for the 38 fund groups is ‐12 (i.e. more detractors than
supporters). There is a 98‐point range in customer loyalty scores from the
highest positive‐scoring firm to the lowest negative‐scoring firm. In fact, more
than two‐thirds of the mutual fund companies analyzed received negative
loyalty scores meaning these firms have more detractors than supporters.
A similar analysis of 23 leading investment distributors resulted in an
average distributor customer loyalty score of 36 and a 78‐point range between
the highest and lowest scoring firm. In the case of distributors, all 23 companies
earned positive customer loyalty scores (more supporters than detractors).
“The fact that the average mutual fund customer loyalty score is negative
reflects a highly competitive industry in which only a handful of fund groups
have been able to produce the kind of consistent long‐term performance required
to earn client loyalty,” said Brown.
The study includes a survey conducted online of a representative cross
section of 4,000 U.S. adults with at least $100,000 in investable assets with
significant participation of high net worth investors with more than $2 million in
investable assets. Cogent Research LLC conducted the survey between October 6,
and November 1, 2006. The survey has a sampling error of +/‐1.55 percentage
points at the 95% confidence level.
About Cogent Research LLC
Based in Cambridge, Massachusetts, Cogent Research is a market research
firm with more than a decade of experience providing marketing professionals
and senior executives around the globe with high quality, innovative research
design, data collection and marketing analysis. Cogent offers a full range of
traditional and cutting‐edge technology based qualitative and quantitative
market research tools including phone surveys, mail surveys, web surveys, focus
groups, in‐depth interviews and online focus groups. Cogent focuses on strategic
issues including brand development and positioning, product development,
communications design and testing, market assessment, public opinion,
employee and customer satisfaction and website evaluation.
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