Every investment advisor needs to have a calm outlook when turning prospects into clients. If you have an intense demeanor that screams, “it’s either my way or the highway,” then you are on the right blog.
Much like everything else in life, investment is not a one-size-fits-all phenomenon. Therefore, we would prescribe you to draw types of investors out by knowing a little about what they are looking for and then steer the conversation.
One question that works wonders in opening up high-net-worth individuals is: “What kind of involvement are you looking to have with your portfolio on a day-to-day basis?”
If these types of investors have an immediate answer, it would be correct to deduce that they are clear about their goals. But, if they ask you what that means, then maybe there is more work to be done with the client.
Here’s a look at the ten most common types of investors and how they like to approach their money!
1. Outsourcing asset and investment management
This type of investor wants minimum involvement with their portfolio. This might mean that they are not as investment savvy or do not have the time to get into it. Artists, sportspersons, airline pilots, and surgeons would be some common professions with such hazards.
How to approach them:
Their investment advisor will manage their assets. If you have a client like this, then offer periodic portfolio rebalancing. Direct them towards more balanced funds, high-value life insurance, or mutual funds covering all major asset classes. These investors are also likely to find their rhythm with Robo-investors.
In such cases, your client is likely to have low levels of involvement while requiring a medium level of initiative on your part.
2. Outsourced with incremental assets
This type of investor lacks the asset base of the previous class. However, they have significant cash flow, which helps them build their portfolio over time.
How to approach them:
The best way to help this type of investor is to direct them towards an investment that requires EMI or premiums to help them build their wealth. You could also agree on the necessary investment expenditure of the month and then decide timely where that money should go.
In this case, both your and the investor’s level of involvement required is medium.
3. Collaborating for the bigger picture
Some clients do not want to worry about their investments all the time. But they do want you to update them on the bigger picture and how their money is growing. This type of investor is the most common among Ultra-high-net-worth and High-net-worth clients.
How to approach them:
In these cases, you need to have a more managed money approach. Build portfolios of ETFs and mutual funds, in addition to individually managed accounts. You will need to give them periodic reviews on their asset performance and suggest rebalancing portfolios and their performance from time to time.
These types of clients will require medium involvement on both sides.
Also Read: 7 things that the super-rich look for in wealth managers
4. The Blended Investor
This type of investor wants to hear from you but wants to stay involved. They are okay with making the technical decisions but expect to be asked when you need to make the big ones. Blended investors do not like to shy away from owning individual stocks either, as long as you help them make money.
How to approach them:
The best fit here is managed money. These make the more significant building blocks and allocate a certain amount to buy stocks. However, this requires a fee-based account, and there are upfront costs. All these designated funds together make the portfolio, but discretion is only involved for the managed money portion. It requires medium involvement from both stakeholders.
5. The stock trader
This type of investor is in love with stocks. However, they might or might not have studied the market extensively. Since these investors are opposed to the concept of managed money, they like to control the steering wheel at all times. They do understand buying and holding stocks.
How to approach them:
All the stock trader cares about are stocks, irrespective of their idea or yours. Don’t be afraid to stay on top of things and draw the line between solicited and unsolicited trades. It would be best to keep them updated on the stocks you think will be good for them. However, they are generally on their own for the rest of them.
These types of traders require high involvement on both ends.
6. Frequent traders
The frequent trader type has learned the basics of trading online or on a mobile app. They want to move into the more prominent leagues and invest with a firm that knows the market. Frequent traders prioritize human contact whenever they need help.
How to approach them:
There is very little you have to do with these traders. Most of their trading will be unsolicited, and if they are a bit retro, they might ask you to place the orders for them. However, your prominent role will be to share ideas and increase rapport.
Frequent traders require a high level of engagement from you.
7. Options Traders
Options trading requires special knowledge. This means you will need to approve your client for it. Approvals should be frequently updated, as they may or may not know how to place orders online directly. In such cases, you will have to do it for them.
How to approach them:
For investment advisors who are not skilled options traders, this type of client might be a bad idea. Especially since you will always have to be available during market hours, and the account will have your name and production number.
This, too, requires high involvement from the investment advisor and investor.
8. The hater of stocks
Some clients hate stocks. They are better impressed by other investment types such as real estate or high-value life insurance. The main goal for this type of client is to create income-producing assets and bonds for them.
How to approach them:
Stock haters have their money on individual securities. These clients love bonds because their money is supposed to return to them on a specific date. Most of your job will be giving them ideas and steering them out of trouble if they start reaching for yield.
These investors need medium involvement from you while having low participation on their part.
9. Retirees seeking steady income
This type of retiree investor cares very little about stocks. Their primary goal is to supplement their cash flow from a pension, and they do not want to touch the principal.
How to approach them:
Avoid managed money and packaged fixed incomes. You are better off suggesting individual bonds or total return stocks. Call them when you find a preferred stock and promise a good return. In such cases, you will require a high level of involvement on your part while expecting very little on theirs.
10. Retirees seeking guaranteed income
All these types of investors ask for are regular updates. They have a low tolerance for market excuses, probably because they understand very little. These investors are looking for a guaranteed income and are unwilling to access the principal amount.
How to approach them:
Like we said earlier, these clients care about a guaranteed paycheck in their bank accounts at the end of every month. Always recommend a few annuities from highly rated providers.
Requires low levels of involvement on both ends.
All these types of investors will need varying levels of involvement and expertise. Also, you could help the ones that are more risk-averse by steering them towards high-value life insurance.
If you are looking for bespoke life insurance solutions that will help you get the attention of the ultra-rich, then get in touch with CAN today. At Continental Associate Network, we help you find the best investment and life insurance options for your High-Net-Worth clients.
