Victor Gaxiola says there are three things advisors must remember about clients: They can sometimes hang on to investments too long, they sometimes think they know more than the advisor and they can get get overly afraid of losing money.
“Advisors tend to segment clients into asset levels,” said Gaxiola, vice president of marketing and sales at Finworx, a software company in Knoxville, Tenn., that develops programs to help advisors understand their clients. “They should be segmenting them on the basis of what type of investors they are and then using that to create their portfolios."
Some clients base decisions on irrelevant data, have an inflated opinion of their own knowledge or are afraid to diverge from the status quo even if they are presented with good investing opportunities, Gaxiola said.
These attitudes put them in one or more of four categories, according to Finworx, which has developed a survey to help advisors know their clients. The "guardian" wants to preserve assets for the future; the "chief" is a growth-driven decision maker; the "inspector" follows what is working in the market; and the "outlaw" is an independent thinker looking for opportunity.
“At some point down the road, these behavioral factors will form a larger part of the advisor-client relationship than the financial data does,” he predicted. “It provides a deeper level of understanding for the advisor.”
The advisor can then approach clients based on their personal characteristics, he said.
“For instance, the advisor would know which clients to call first in a market downturn because he or she would know who would be the most nervous,” Gaxiola said. “Advisors need to start thinking about this additional layer of information so that the client feels more inclined to work with a person rather than a robo-advisor.”