You are at a social gathering, and you meet someone new. Perhaps it is a total stranger, or someone who knows someone you know. You have to start a conversation, and so you go with the standard opener “what do you do for a living?”
It’s a certain conversation starter. Either you know someone in a similar position, or you have never met someone in that occupation, and you can ask all the questions that pop up (for example, “Do therapists have therapists?”)
For financial advisors, the question holds a bit more meaning. Finding out what a prospective or new client does for a living can go a long way to determining what kind of investor-advisor relationship you will have and what it is going to take to keep that client satisfied.
Spectrem’s wealth segmentation series of studies segments wealthy investors by occupation to help advisors understand how investors from different occupations differ as investors. The latest Spectrem study, Advisor Relationship and Changing Advice Requirements, provides background on how investors from different occupations relate to their financial advisor.
Among investors with a net worth between $100,000 and $25 million (not including primary residence), the most popular occupations of investors are Manager, Educator, Professional (doctors, lawyers, accountants), Information Technology, Business Owner, and Senior Corporate Executive.
How does the Spectrem research benefit advisors and their attitude toward investors? One of the best examples is in terms of investable assets the investors control versus the investable assets they turn over to an advisor. Investors from the field of Information Technology hold on to much more of their investable assets (55 percent) while Educators allow advisors to have at least some say in the investing of 57 percent of their assets.
So an educator comes in to your office looking for a financial advisor. That person is likely to be willing to proffer more of their assets for advisor involvement than the investor form the field of Information Technology. Advisors need to act accordingly.
Investors were asked to describe their level of advisor dependency. Investors from Information Technology and the Professionals were the least dependent while Educators described themselves as most dependent. This dovetails with and solidifies the research regarding the percentage of assets turned over to advisors.
Who are the investors most likely to leave an advisor over poor investment performance? Who are the ones most likely to leave an advisor for poor advisor communication habits? It’s Managers and Senior Corporate Executives who will change advisors due to poor returns, and Educators who will dump an advisor over poor communication.
Which occupation produces the most risk-averse investors? How do Professionals differ from Educators in terms of investment knowledge? What’s the best way to satisfy an investor from the field of Investor Technology?
The research reports on investor likelihoods; not all Educators are alike, not all Professionals relate to their advisor in the same way. But it is telling that investors from certain occupations are likely to have the same reaction to advisor performance.
The Spectrem study is a way to know what you are getting into the moment you get an answer to the question “what do you do for a living?”