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Practice Management > Building Your Business > Prospect Clients

10 Types of Investors Who Seek Advice

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“It’s my way or the highway.” That’s not likely to turn prospects into clients very often. “Let me explain how I work with clients” is a softer approach.

Like clothing, one size rarely fits all. Use a simple question to draw them out, then determine where you want to take the conversation.

Here’s the question: When it comes to day-to-day portfolio management, how involved do you want to be?

They might have an immediate answer or they would ask: “What do you mean?” That opens the discussion. Here are 10 common ways your prospects might want to approach investing.

1. Total outsourcing, lots of assets.

They don’t want to think about it. They either don’t watch the financial news or they want to know someone else is minding the store. Extreme examples might be an airline pilot or a cardiac surgeon.

Approach: They are a total managed money client. Your contact with them might be for portfolio rebalancing during quarterly or periodic reviews. Robo-advisors could fit here, too. Mutual funds that cover all major asset classes might fit too. Balanced funds should fit into this category.

Your level of involvement is medium. Their level of involvement is low.

2. Total outsourcing, less assets or adding monthly.

They don’t have lots accumulated, but their cash flow is substantial. Between monthly contributions and their annual bonus, they have the ability to build up their asset base over time.

Approach: The portfolio might be structured to own a series of mutual funds or other investments that could be added to automatically, similar to they way their car payment is debited each month to their checking account. Another approach is to agree on an amount and have a conversation each month, determining where the money will be allocated.

Your level of involvement is medium. Their level of involvement is medium. 

3. Big-picture collaborative approach.

They don’t want to worry about it, but they do want to be brought into the decision-making process. Put another way, they want to hear from you. This is the traditional type of client relationship going back decades. Individual stocks aren’t that important to them.

Approach: This likely involves managed money. It would involve asset-based pricing. The advisor would build a portfolio of ETFs and mutual funds in addition to separately managed accounts. Periodic reviews would focus on progress to goals, performance vs. indexes and rebalancing.

Your level of involvement is medium. Their level of involvement is medium.

4. The blended approach.

This client also wants to hear from you. They like the idea of someone else driving the bus, but they like the thrill of owning individual stocks. In many cases they are happy leaving those choices to you, but they want to make the final decision.

Approach: Managed money is a good fit for the bigger building blocks, but a certain amount of money is invested in individual stocks. This is done through a fee based account, establishing costs up front. Together, those designated funds build into a portfolio. You call with ideas and suggest changes. Except for the managed money portion, discretion isn’t involved.

Your level of involvement is medium. Their level of involvement is medium.

5. The stock trader.

They love stocks! They might or might not do their own research. They don’t like the concept of managed money. They want to make the ultimate decision. They aren’t necessarily frequent traders. They understand buy and hold.

Approach: It’s all about stocks — your ideas or their ideas. You need to stay on top of things. You also need to draw a line between solicited and unsolicited trades. You keep them updated regarding stocks where your firm has an opinion. For those obscure stocks they find, they are on their own.

Your level of involvement is high. Their level of involvement is high.

6. The frequent trader.

Today, this client might be trading online or through an app. They are the ultimate self-directed client. They might have made their way to you because they prefer having an account at a firm with history. They want a designated human contact in case they need anything.

Approach: You likely won’t have lots to do with their unsolicited trading activity. They might be working entirely online or asking you to place orders if they are “old school.” You might try establishing rapport and sharing ideas.

Your level of involvement is high. Their level of involvement is high.

7. The options trader.

This is an area requiring specialized knowledge. The client needs to be approved for it. This approval needs to be frequently updated. They may or may not be able to place orders directly online. If not, you are doing it for them.

Approach: If you aren’t skilled in this area, this might not be the client for you. If you won’t be at your terminal, always available during market hours, this client may not be a good fit. The risks are high. Your name and production number are on the account. If you aren’t an expert, you are an order taker.

Your level of involvement is high. Their level of involvement is high.

8. The stock hater.

Not everyone is in love with the stock market. Some people favor other investment classes like physical real estate. They become your client because they want income-producing assets. They are bond buyers. No stocks for them.

Approach: You’ve probably seen these clients before. The portfolio would logically be built from individual securities. They like bonds because your money is supposed to come back on a certain date. Laddering bonds might work. You call with ideas. A major part of your job is keeping them out of trouble if they try reaching for yield.

Your level of involvement is medium. Their level of involvement is low.

9. The retiree seeking steady income.

They aren’t really interested in trading stocks. They might call with the occasional idea, but it’s rare. They’ve stopped working. Their major concern is supplementing their Social Security and pension income. They have no intention of touching the principal.

Approach: You don’t want to disappoint, so you likely avoid packaged fixed income products or managed money. You suggest total return stocks and individual bonds. You are calling them when you find a good preferred stock or a bond that looks safe with a decent return.

Your level of involvement is high. Their level of involvement is low. 

10. The retiree and guaranteed income.

All they want is a monthly check. They don’t ever want a story that begins “The market took us by surprise…” No excuses. They might not understand investing. Inflation protection might be nice, but they will trade that for a guaranteed income. They aren’t expecting to ever access the original principal.

Approach: This sounds like an annuity client. They want the security of knowing they are getting a monthly amount deposited into their account like a paycheck. You recommend a few annuities from different, highly rated providers.

Your level of involvement is low. Their level of involvement is low.

For all 10 types of investors, the degree they desire to be involves also dictates the degree you will be involved. It also determines the type of products that would be a good fit.


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