Advisors work with their clients to achieve some of the most important goals in their lives by building the financial foundation for retirement. There are many aspects of this process which involve constant interaction with the clients and prospects and is necessary to earn their trust with their money being entrusted to their advisers. This is exactly what makes this job very interesting and challenging at the same time, it is the people you are dealing with. We are all the same but different in many ways having different views, ideas, tastes, lifestyles, tempers, and of course, different attitudes toward money management.
There are many types of personalities but some generalization is necessary to make any classification useful. For example, a recent article from the Brighthouse Financial mentioned four client types and their financial capabilities to manage money. The four types of clients are avoidant clients, overconfident clients, underconfident clients, and regretful clients. Regardless of how broad the spectrum of the personalities is, as an advisor you can unlock the potential for the future relationship by carefully listening and genially understanding the needs of the client/prospect. Here are a few important points:
Money-avoidant clients make up one-third of all client. In general, they do not take pleasure in managing their money and prefer to find someone else who would do it for them. They are ideal clients for advisors because they are eager to seek advice and appreciate it, if it makes their lives easier. This type needs to be engaged in financial planning slowly by teaching them how to manage small tasks first. For example, organizing their financial statements can be a first step towards the financial order. Eventually, building up to bigger tasks, such as deciding how much money to take out of their savings in retirement. The most important factor to keep in mind is to teach them that engagement in financial planning can lead to financial stability and independence in the future.
About one-fifth of the clients are overconfident in the ability to deal with financial matters. Predominately, these clients are young males who are self-assured about their financial capabilities, willing to take action but frequently change their minds about investment strategies or products they committed to. This group is hard to work with, so the advisers must provide them with the necessary information based on which they can make a good decision and stick with it. Such a strategy implies focusing on the big picture like the long term goal of having a comfortable lifestyle in retirement. Also, action for the sake of action should be replaced by taking deliberate steps to achieve big goals like creating a diversified portfolio.
A large part of this group consists of middle-aged women who know how financial products work but may not be as proactive about managing their money as those in other groups. They may lack confidence in what steps must be taken to achieve their financial goals. It is paramount to help them develop self-confidence by focusing on the end goals, what they want beyond money and laying out steps to get to their specific goal. The useful information that motivates this group can be various future retirement scenarios or how people in their age handle money. Visualizing their future can make underconfident clients proactive in planning their ideal financial future.
Regretful clients are those who had negative experiences with money. It can be a bad investment decision, credit card debt or any disarray in financial matters. People with a bad experience tend to stay away from repeating it which is similar to the problem the underconfident clients face, a basic lack of confidence. This group needs a well-structured plan build on accomplishing small tasks which should eventually lead to a bigger goal.
Understanding your clients and prospects and how to interact with them is indispensable in becoming a successful advisor. There is no cookie-cutter approach on how to work with the different types of people because every encounter between the advisor and client or prospect is unique based on the personalities, circumstances, mutual agreement and interest to work together. In a way, it can be compared to the biological protein binding. Both parties have to “click” to be able to work together. However, where a client has a the freedom to choose an advisor, the advisor has to find a key to each prospect to make him a client. It requires you to be a financial professional as well as a psychologist, who needs to develop a strategy to achieve the financial goals of their clients based on their personality type.