Main site

Tailoring advice for different client personalities

4 mins read

When offering financial advice to clients it’s important to understand their unique personalities and behaviours. Rather than segmenting based on differences, grouping clients into similar personality traits can help with the advice process.

Tailoring advice for different client personalities

Over the years, psychologists have characterised the multitude of human personalities and condensed them into five basic dimensions called the ‘Big Five’ personality traits:

  • Extraversion
  • Agreeableness
  • Openness
  • Conscientiousness
  • Neuroticism

And while extensive research has been published on how each of these correlates with an investor's willingness to take on risk, one expert suggests a simple, common-sense approach. 

For Bri Williams, a behavioural specialist and author of The How of Habits and Behavioural Economics for Business, financial advisers should start from a position of similarity, not difference, when factoring a client’s personality into the advice process.

“In other words, before worrying about how each client is different, understand how humans are all similarly wired to make decisions,” she says. Your job is to address each of these barriers that stop financial advice being sought and acted upon.”

Once the adviser has dealt with decision-making at this macro level, Williams says they should look to adding nuance to interactions with individual clients.

“Some like detail, others prefer case studies. Some respond to numbers, others to story. The key is to adapt your method of communicating information to the way that best resonates with them.” she says.

A good example of this is presented in The SMSF Report, produced by CommBank in 2017 with the SMSF Association, where the research identified four typical self-managed superannuation fund investor profiles. These are:

  • The Outsourcer – “I’d rather someone else do it”
  • The Self-Directed Investor – “I’m interested in it and I like doing it myself”
  • The Coach Seeker – “I’d rather do things myself but I am looking for someone to help me”
  • The Controller – “I’d rather do things myself but I need information to support my decisions.”

The report concludes that advisers who do not adapt to the varying needs of different investor types may find it difficult to attract new clients as the sector continues to grow and evolve.

Client engagement

But how can advisers ensure that personality is a contributing factor to a client's risk profile and, ultimately, a factor in their financial plan?

“There are many personality profiling tools you can draw upon. Asking your clients to complete a short survey will show you are interested in them as individuals, and will allow you to better tailor your advice, rather than giving them generic information,” says Williams.

“Always remember that people are the hero of their own story, so the more you do to show you are interested in them, the better your relationship will be.”

And while financial advisers usually explore factors such as age, the size of the investment portfolio, the clients’ expected retirement date, future earnings and financial obligations to gauge an investor's risk tolerance, personality is also an important factor that influences the soft skills an adviser may need to apply to get the full picture. “If you want your client to act on your advice, it helps to know how best to frame the information so it lands. For example, should you give them lots of information,  or should we spend more time on a visioning exercise? Should you draw diagrams and pictures, or send them a spreadsheet? Do they prefer face-to-face discussions or an occasional email or phone call?”

For Williams, the key lesson is that client engagement requires multiple interactions, from letters of engagement to invoicing and everything in between. The adviser’s role is to make each of these interactions productive for everyone involved. 

According to the 2016 Association of Financial Advisers (AFA) Whitepaper Money, Well-being and the Role of Financial Advice: a gender-based approach, involving clients in the decision-making processes and creating a deeper understanding around their financial strategy is likely to increase their commitment to maintaining the strategies and behavioural changes that are part of the advice they receive.

Tips for advisers:

  • Conduct regular client experience surveys to understand the needs and expectations of your clients so that you are in the best position to deliver on these.
  • Implement client-centric systems and processes targeted at delivering on clients’ needs and expectations across all touch-points. Consider using visual aids like a “traffic-light” report to clearly indicate progress towards their lifestyle and financial goals.
  • At every meeting, check in with your clients on what else you could do to improve your service and their experience.

Important: This article has been prepared without taking account of the objectives, financial or taxation situation or needs of any particular individual. Before acting on the information, you should consider its appropriateness to your circumstances and if necessary, seek appropriate professional advice. Any information used in this article is for illustrative purposes only. Bri Williams is external and not a member of the Commonwealth Bank of Australia Group of Companies (the Group) and the content or any view expressed by Williams does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. CBA, nor members of the Group accept any liability for losses or damage arising from any reliance on external parties, their products, services and materials. Past performance is no guarantee of future performance.

Infographic
Reporting Season - February 2021

Enjoying the article?

Get a monthly dose of financial advice, insights and practical tips!

required
required
required

Want to talk?

We'll get a Business Development Manager to call you.

required
required
required