Becoming a doctor, dentist or lawyer requires years of discipline and study. Success in those areas can be decades in the making. A dedication to the profession eventually pays off financially, but the initial effort is daunting.
Considering the effort one goes to in order to work as a doctor, dentist, lawyer or accountant, it makes sense that these Professionals would have a unique approach to investing. Their life experience in getting to the stage of their lives when they can begin to make money is obviously expected to play a role in deciding how they are going to invest the money they make once they are profiting from their educational background.
Spectrem’s new study of investor attitudes and behaviors includes segmentation of investors by occupation, and Professionals are one of the segments studied. Compared against Business Owners, Managers and Senior Corporate Executives all with a net worth over $5 million to $25 million, these Ultra High Net Worth Professionals stand out in a number of ways which would prove helpful to advisors working with doctors and lawyers and the like.
“Knowing how an investor’s profession affects investment attitudes makes it so much easier to make recommendations and satisfy the investor,’’ said Spectrem president George H. Walper Jr. “In the case of Professionals, many of their investment behaviors are easily explained based on their background of investing in themselves first.”
In Financial Behaviors and the Investor’s Mindset, investors were asked which of about a dozen factors played a role in their personal wealth creation. While almost all investors selected “hard work’’ as a factor, 97 percent of Professionals also selected “education’’ (in contrast, only 89 percent of Senior Corporate Executives made that selection). Professionals were also most likely to select “Luck” (64 percent) and “decisions made for me by my financial advisor” (52 percent). For some reason, Professionals also had the highest incidence of selecting “inheritance” (35 percent).
Seventy percent of UHNW Professionals, the highest percentage of respondents from any one occupation, said their financial situation today is better than it was one year ago. However, Professionals were least likely to believe the results of the recent presidential election would benefit their investment returns (37 percent to 47 percent overall). It is noteworthy that 66 percent of Professionals (the highest percentage by occupation) admitted to concern over the new presidential administration.
For advisors working with Professionals, check with them to see if they fit the characterization that the last year has been an especially good one for investments. Then find out why, and suggest increasing investment in those areas that worked well for the client.
For the first time, Spectrem asked investors how they feel about the suggestion that the federal government should forgive all or most college student loans. This is obviously a topic of interest to anyone who has ever taken a student loan, and that obviously includes doctors and lawyers and dentists. As such, 16 percent of Professionals said the government “definitely’’ or “probably” should forgive college student loans. In contrast, only 5 percent of Senior Corporate Executives felt that way on the topic of student loans.
It is possible that the Professionals you are working with still have liabilities related to their college and graduate work. Finding out the liabilities of Professionals would benefit the investor-advisor relationship because the advisor would have a better idea what weights exist upon the investor’s portfolio.
Professionals are also most likely among investors segmented by occupation to consider the reputation of the companies where investments are made, and the past track record of investments. Professionals are by far the most interested in the social responsibility of investments segmented by occupation, which means advisors should consider pitching socially responsible investments toward the doctors and lawyers among their clientele.
Top Takeaways for Advisors
It makes sense that Professionals would have a unique approach to investing based on their probable financial background paying for years and years of extra education. The Spectrem study Financial Behaviors and the Investor’s Mindset display numerous differences among investors based on occupation, and advisors should definitely go into some detail with clients about how their occupation affects their investment decisions.
©2017 Spectrem Group