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How investors select advisers

29 June 2017 | Topical insights

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Commentary by Anna Madamba, senior research analyst, Vanguard Centre for Investor Research.

Understanding how investors select advisers can help you attract and retain clients who are well-suited to your practice. You can more easily satisfy clients if you know what they care about.

A recent Vanguard report – part of our Advised Investor Insights research series – uncovers key factors to help you better understand clients and prospects and win more referrals.

No two clients are alike, but …

There is naturally significant variety among investors. However, we have identified five profiles of common client types who tend to share important traits. Our findings suggest how you can deepen your relationships with each of them. These profiles won't replace how you segment your own business, but they can complement your approach.

As explained here, we've found that behavioural factors – notably, investors' sense of their own investment knowledge and the degree to which they care about advisers' technical and 'soft' skills – are important drivers in the selection process.

Also important, of course, are referrals. As you've probably found, a prospect who is referred to you is more likely to become a client – and a loyal one at that. Interestingly, and perhaps counterintuitively, we note that the source of a referral isn't particularly significant. Recommendations carry about the same weight whether they come from a neighbour, friend or another professional adviser, such as a lawyer or an accountant.

The five types of advised investors

In late 2015, Vanguard worked with an independent research firm to survey almost 4,000 advised investors in the United States with assets of at least US $100,000 (about £75,000). From this, we created five common client profiles:

1. "Talk to me" (18% of our surveyed population)

This type of client is the most adviser-dependent. They lack financial confidence. They are not knowledgeable or organised when it comes to finances. They depend on you, looking for you to take charge from the outset to protect and grow their money.

For these clients, your soft skills – notably, your willingness to educate and being easy to talk to – are important.

You can tailor your approach to prospective "Talk to me" clients by:

  • Understanding that they may need more attention than other clients.
  • Focusing on rapport and relationship-building.
  • Talking about goals and offering instructive examples from everyday life.

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2. "Do it for me" (25%)

These clients don't spend much time on investments – and don't want to. Like "Talk to me" investors, they lack confidence and will depend on your guidance. They may be less satisfied with you, and less loyal, but they aren't likely to switch advisers, as they doubt their ability to choose.

"Do it for me" clients don't need a lot of attention, but they do need targeted help around events such as buying a home or saving for a child's education.

Tailor your approach by:

  • Setting expectations.
  • Making the process easy for them.
  • Sharing your credentials, knowledge and performance history.

3. "I want it all" (15%)

This investor seeks the complete package. He or she seems the most demanding of clients, looking for personality, credentials and performance. They hold advisers to a high standard and will look elsewhere if they feel neglected.

"I want it all" clients are somewhat knowledgeable, with 45% managing a portion of their portfolios. They're confident, organised and feel in control, but still value your work.

Tailor your approach by:

  • Focusing on rapport and relationship-building.
  • Being available through multiple channels.
  • Asking for feedback.

4. "Show me performance" (21%)

These clients are all business. Confident and financially savvy, they do their homework and focus on facts – primarily the returns you deliver. Nearly half manage portions of their portfolios and want to be involved in your research and decisions.

This type of client selects an adviser based on information rather than intuition. He or she prefers a professional, even transactional, relationship and is not particularly interested in your personality.

Tailor your approach by:

  • Stressing facts, experience and performance.
  • Focusing less on soft skills and more on credentials.
  • Seeking to understand the client's finances in total.

5. "Partner with me" (21%)

This investor is the most knowledgeable. Self-made, confident and organised, he or she expects to work closely with you in managing the portfolio. Your performance track record is important, but so is your personality.

A "Partner with me" client is often sought out by others for financial advice – and for referrals to advisers like you.

Tailor your approach by:

  • Building rapport whilst demonstrating credentials.
  • Reviewing investment tools and why you recommend them.
  • Explaining your approach simply and clearly.

The role of referrals

Referrals are the driving force in adviser selection. More than half of all clients in our survey found their advisers through referral – and this was true across all five of our profiles. That's why it's essential to think carefully about your approach to finding and attracting new clients.

How investors find advisers

Advantage of Advice

Source: Vanguard. Figures are rounded.

A client who comes to an adviser through referral is less likely to switch and more likely to recommend his or her adviser to others. Our research found that investors seek referrals from three types of people: those they trust, those who are financially successful, and those who are in similar stages of life or share their financial goals. Friends, colleagues and close family members are the most common referral sources.

Anna MadambaAnna Madamba
Senior research analyst,
Vanguard Centre for Investor Research

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Investment risk information:

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. Past performance is not a reliable indicator of future results.

Other important information:

This document is directed at professional investors and should not be distributed to, or relied upon by, retail investors.

This document is designed for use by, and is directed only at persons resident in the UK

The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so.

The information in this article does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this article when making any investment decisions.

The opinions expressed in this article are those of individual authors and may not be representative of Vanguard Asset Management, Limited.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

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