Wealth level is an obvious influence on investing decisions. The wealthier the investor, the more likely that person is to have a sizable investment portfolio.
Age is an obvious influence on investing decisions. Investors nearing retirement age make entirely different investment decisions than do investors for whom retirement is a quarter-century away.
Family, spouses, friends and co-workers can have influences on investing decisions. Investors can get investment ideas from all the people they interact with, especially if those people happen to be active investors as well.
But advisors may be missing a key element of investor influence by ignoring, or not giving enough credence to, an investor’s occupation. While it is true that all dentists do not invest identically, they have financial backgrounds that are likely to have similarities, and those similarities may play out in investment decisions.
There are several examples in which occupation can play a role in investment decisions, and Spectrem’s quarterly wealth segmentation studies take an in-depth look at occupation as an investment factor. Depending on the wealth of the investor, Spectrem considers the special cases of Professionals (doctors, lawyers, dentists and accountants), Senior Corporate Executives, Managers, Educators, Business Owners, and people employed in the field of Information Technology.
The last occupation listed above – Information Technology – is a perfect example of how occupation can color investment strategy. People employed in Information Technology are likely younger, and may be new to investing. They are likely well-informed on financial issues, and are likely to be willing to expand investment choices beyond basic products. Information Technology investors are more likely to consider and choose alternative investments, and advisors should be aware of that tendency.
Business Owners are an obvious separate segment of the population. Because of the financial pressures related to their business, they have an entirely different set of motivations and precautions they take in investments. Spectrem’s studies, like the new Financial Behaviors and the Investor’s Mindset, reveals just how investors in different occupations see investing differently, and the Business Owner example is best seen when looking at satisfaction with financial services, long-term investment strategies and national issues related to government policies.
Senior Corporate Executives are another example of an occupational segment with unique perspectives on investing. They are most likely to have a strong working relationship with a financial advisor, they are overly concerned with taxes, but they have greater agreement with their spouses and partners on financial issues at home.
A majority of Professionals (the doctors, lawyers and dentists) probably took out loans to get through the many years of schooling they endured. No matter where they are presently in terms of their net worth and percentage of investable assets, they recall a time when they were in a different boat financially. Time and again, the study reveals how that background likely influences their investment decisions today.
You can see how having this information on investors can make advising and conferring that much easier from the beginning. While the research does show trends rather than absolutes, in many cases the trends are strong and getting stronger, especially in the case of occupational differences.