ETF Brand Loyalty: A Long Way To Go

February 17, 2010

New research from Cogent suggests that ETF investors couldn’t care less about their ETF providers—but that’s changing fast.

I love a good survey. And one of the ways a survey is good is when it asks the right questions. I’ll bet you’ve heard this question before when interrupted at dinner:

“On a scale of 1 to 10, how likely are you to recommend XYZ to a colleague or friend?”

That question, it turns out, is the driver of the “Net Promoter Score” metric, a trademarked system of evaluating brands from Satmetrix. The math is ludicrously simple. You ask a few thousand people that one question about something (usually a corporate brand). You throw out all the 7s and 8s, because clearly anyone answering 7 or 8 is really just kind of “meh” about your brand. What you’re left with are your die-hard promoters (9s and 10s), and the detractors who’d just as soon you die in a fire (1s through 6s).

The Net Promoter Score is the percentage of respondents who are promoters, minus the percentage who are detractors. Your best possible score is 100 percent fanboy—nobody says anything bad about you, and nobody is even on the fence. That’s the impossible dream. The worst possible score is -100 percent, meaning you interviewed 100 Enron pensioners about their love for Ken Lay.

So what’s “good?” Good is Apple Computer, with an NPS of 77 percent. What’s bad? Well, the average NPS of U.S. banks after the credit crisis was 15 percent, with the boy scouts, like Charles Schwab, hanging in there with a 36 percent.

Based on the 2010 Investor Brandscape report from Cogent Research, a monolithic 200+ page survey of 4,000 households with $100,000 or more to invest, ETFs have a long way to go, with an average NPS of -4 percent.

Negative 4 percent!

What’s worse, this average is hugely skewed by a single player’s positive rating, and we can all guess who that might be: squeaky clean Vanguard, with a 2009 NPS of 18 percent. Frankly, I find that a pretty shockingly low number. Here’s the top 5 list, looking at both 2008 and 2009 numbers:



2009 NPS (%)

2008 NPS (%)










Invesco PowerShares









Overall Average




Beyond the generally low numbers, there aren’t any big surprises here. The dramatic fall of ProShares is most likely attributable to a group of investors who got burned with leveraged and inverse products in 2009, particularly around tax time last year. The rise of Vanguard likely coincides with a trend Matt and I have been discussing for months—investors getting more construction and cost conscious.

So how do we explain the generally miserable nature of things here? Clearly folks get evangelical about some things and not others. Vanguard inspires that kind of evangelism, and not many other financial brands do. But perhaps most telling is this summation from the report:

“Currently, the top driver of client loyalty toward ETF providers is a combination of a company’s range of product offerings and its fee structure.”

In other words, it’s hard to be an expensive upstart.

So how do ETF issuers bridge the brand gap? By treating customers well. That means good education, honest products and reasonable expenses. It also means keeping top of mind something that iShares is clearly working on in their recent moves with Fidelity: the retail investor’s experience. It remains to be seen whether this is enough to overcome the turmoil of the BlackRock acquisition, which is the most likely reason for the year over-year-drop in brand loyalty for iShares.

At least there’s lots of room for improvement. Maybe they need to hire Steve Jobs?



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