“Let me start by asking you a few questions.”
That is a sentence an advisor might say to a new investor to determine what their intentions are related to investing and making future financial plans. The same sentence might be said to an investor who only makes an occasional visit with an advisor, perhaps a once-a-year type.
The goal of an advisor in meeting with a new or infrequent client is to determine what they are thinking about the process of investing. Certainly, the goals of the investor are examined to determine if they are trying to make money for now or make money for later.
You may already have a list you run through with each investor to get an idea where their head is at in terms of investing and personal financial decisions. The study examines all of the topics which run through an investor’s mind, including:
- Who influences your decision-making? “Spouse” and “financial advisor” lead the pack, according to the study, which means advisors need to consider the spouse when dealing with a married investor.
- What influences your decision-making? The study asks investors about a myriad of influences, including investment performance, company base of operations, familiarity with a product or company, as well as the environmental and humanitarian considerations of the company involved.
- Safety vs. return. This is the classic investor question, and the study shows that investors can go either way on this topic. Asked to place their interest on a 0-to-100 scale, with safety represented by “0” and return represented by “100”, the investor average places their interest at 49.28, right in the middle. The study segments investors by a number of demographic differences, and advisors need to know which way an investor leans on this key topic.
- Do you watch the stock market? There are investors who watch their TV monitors all day to keep an eye on the ticker report, and others (16 percent of all investors) who don’t give the stock market a first or second thought.
- Do you prefer to invest in individual stocks or mutual funds? The answer to this question would cover a lot of ground related to your work with an investor. According to the study, investors lean slightly toward preferring bundled stock products, like mutual funds or exchange-traded funds.
- Profits versus principles. This is a topic that has warmed up in recent years and is a focus for many Millennials and Gen X investors. How a company impacts the environment and treats employees now plays a significant role for many investors, and they are looking for companies to invest in which do not compromise the investor’s personal viewpoints on those subjects.
There are many other influencers (children, parents, employment security, etc.) that advisors need to discuss with investors, and which are included in the Portfolio Decision-Making study. Knowing the trends that are currently at play among affluent investors in this turbulent time can make your meetings with investors go more smoothly, take less time, and point all investment decisions in the correct direction.
© 2018 Spectrem Group