Do you want to differentiate your firm from the competition while adding value to your client relationships? Then you should focus attention on an area that is ignored by most advisors: client profiling.

Few advisors think of this as an area where they might add value, but it presents them with a great opportunity to stand out in a way their clients will understand and appreciate.

If you’re wondering how client profiling could possibly be worth your attention, then you haven’t been exposed to the research of Shachar Kariv, a professor of economics at UC Berkeley. I heard him speak at a Garrett Planning Network conference and I got a deeper dive into his research at a UC Berkeley Executive Education session in New York. Here are highlights of what I learned.

Client Profiling—A Three-Dimensional Challenge

Your job as an advisor is to understand and balance three dimensions common to every client: their goals, constraints and preferences. To do this at a high level, you need to explore each area separately and document your findings.

Goals. Most clients have multiple goals. These should be identified and prioritized. Few clients can effortlessly list and rank their goals, so asking them to provide this information in response to a simple questionnaire is not likely to produce reliable results. Developing an understanding of their true goals and their relative importance requires a more iterative process.

Start with a conversation. A skilled advisor can guide clients through an exploration of their hopes and dreams for the future. But using tools to help organize the conversation and prioritize goals makes the process more efficient and produces more consistent and reliable results. Clients often do not have sufficient resources to meet all their goals. Understanding the relative priority of goals allows you to provide better advice when trade-offs are necessary.

Developing a more comprehensive understanding of your clients’ goals will give you an edge over virtually all digital advice solutions and many of your human competitors.

Constraints. Step two is understanding the constraints that affect your clients’ ability to reach their goals. The most common constraints are on their time and their current financial assets. Most advisors are pretty good at collecting the facts about assets and liabilities. But many don’t take the time to link the achievement of a client’s various goals to specific pools of assets.

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