Advisors weigh ‘investor type’ to meet clients’ changing needs: Study

Knowing a person’s investment approach could also provide insight into their financial priorities and what they’re looking for in a financial advisor, a new study suggests.

By splitting investors into two categories, based on their general attitudes toward investing, researchers for Edward Jones found other points of agreement within each group regarding a variety of other financial areas, including life events they focus on and what drives them to choose a financial advisor. And, the common behaviors within the two categories were present regardless of age.

The research by Dow Jones Intelligence involved surveying 1,000 U.S. adults across all age groups and dividing them into two categories.

The first, “traditionalists,” are described as more optimistic about market performance and comfortable with a buy-and-hold strategy. They also are more private about their finances. More than half of respondents (55%) fell into this group.

Selecting an advisor or advisory firm

Most important Traditionalists Trailblazers
Technology 9% 37%
Financial advisor characteristics 10% 29%
Company characteristics 53% 22%
Fees 28% 12%

The remaining 45% are “trailblazers,” who are pessimistic about market performance, want holistic financial advice and are more willing to share their financial information, the research shows.

“It’s less about putting clients in one category or the other and more about just understanding that clients think differently,” said Katherine Mauzy, principal for financial advisor talent acquisition at Edward Jones.

Commonalities do exist between the two groups, the study says. For example, among the survey respondents who prioritize health and other significant expenses — regardless of which category they fell into — preparing for future health expenses is more important than saving to buy a car or have emergency savings.

Planning a financial future

Priority Traditionalists Trailblazers
Personal education 11% 26%
Career & employment 14% 23%
Health & other significant expenses 17% 21%
Mortgages 26% 13%
Family 32% 17%

However, each group prioritizes major life expenses differently. For traditionalists, family-related aspects are the focus (32%), while personal education ranks highest among trailblazers (26%).

“This can help advisors understand there might be nuanced differences in what different clients prioritize,” Mauzy said.

“It’s about probing,” she added. “Sometimes clients don’t tell you everything.

“So understanding these characteristics can help anticipate needs they might not be thinking about.”

When it comes to what investors consider when choosing a financial advisor, some of the differences are more pointed than others.

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For example, 28% of traditionalists said fees were their biggest focus when choosing a financial advisor, compared with 12% of trailblazers. Of those who do focus on cost, though, more are concerned about investment fees and transaction fees or commissions than they are about the advisor’s fees, the study shows.

“We hear a lot about fee compression, or that clients are concerned about what they’re being charged, but it’s more about value,” Mauzy said.

Additionally, 53% of traditionalists focus on the financial company’s characteristics — including size and heritage, employee diversity and social media presence — while just 22% of trailblazers do.

Trailblazers also are more focused on technology when selecting an advisor or advisory firm, with 37% naming it a priority, compared with 9% of traditionalists.

However, they also weigh an individual advisor’s characteristics — such as experience, online presence, feedback from family or friends — more heavily in the selection process (29%) versus traditionalists (10%).

“Trailblazers educate themselves … and some advisors think of that as a threat,” Mauzy said. “But advisors need to know despite that, they value advice from a financial advisor.”

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