The Power of Personalization

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Client experience matters. Yet, some advisors are managing an investing process that consists of one-dimensional investor assessments, cookie-cutter portfolios, and static insights. Instead of understanding investor interests and behaviors to improve the financial-planning experience, advisors position their expertise in money management as their greatest asset. This approach causes clients to measure advisor value largely on performance.

As Tom Reiman, former head of wealth solutions at J.D. Power explained, “Advisor satisfaction continues to track overall market performance, and this points to a systemic problem in our industry: advisor value propositions grounded in investment performance.”

Investors come from diverse backgrounds with unique goals, interests, biases, risk tolerances, and values. These investors are looking for advisors who understand them and their unique position, not just portfolio performance. To effectively serve them, financial advisors must go beyond a one-size-fits-all approach and embrace the power of personalization.

Meaningful mindsets

Stop selling your capabilities and ask investors better questions, like: What does investing mean to them? What interests them? Do they care about emerging investing trends? How does the investor want to be involved in the investing process, if at all? And, most importantly, how does the investor want to align fundamental values with long-term objectives?

With a more complete understanding of what’s important, advisors can deliver customized portfolios and more engaging messaging, education, and actionable advice. Instead of feeling detached from – and dissatisfied with – the typical investing assembly line, investors now can feel more engaged and empowered. This newfound sense of connection enhances their trust in the investment process and cultivates long-lasting relationships. Ultimately, this transformation in the client experience benefits the investor and strengthens the advisor's business.

But to personalize at scale, advisors need tools to understand and segment clients efficiently. At Seeds, we use assessment tools that allow advisors to categorize clients into nine distinct investor mindsets that lead to custom portfolios and engaging insights.

For example, the “balanced believer” investor mindset sits in the middle of the spectrum and includes the following characteristics:

The client wants a high-level understanding of portfolio construction but doesn’t feel it’s necessary to understand the technical details.

They prefer to spend time thinking about and discussing the bigger picture such as how the portfolio aligns with long-term financial goals.

They want to know how their money might have effects beyond themselves (i.e., how do the companies they own create or avoid harm) and find comfort in knowing that their portfolios can serve their needs without causing unintended harm elsewhere.

They are likely to be somewhat interested in emerging investment trends (i.e., crypto, AI, electric vehicles).

With this deeper understanding, advisors can consider the following engagement approaches throughout the investing lifecycle, from a portfolio proposal to ongoing portfolio reviews:

Values: Balanced believers may not be aware that values and goals can be prioritized in their portfolio without sacrificing returns. They may not have previously contemplated the effects of their invested capital on the world, but their interest in this aspect can grow once they understand that they don't have to choose between returns and value alignment. During regular portfolio reviews, underscore how the portfolio is constructed to avoid investing in companies that go against their core beliefs and values. While this may not be the primary motivation behind their investment decisions, it still holds significance for them.

Portfolio details: While balanced believers may not be deeply interested in the technical details of portfolio construction, advisors should highlight how the portfolio aligns with their long-term objectives. This instills confidence in the strategy without overwhelming them with excessive technical information or exhaustive performance analysis.

Markets and economy: When engaging with balanced believers, address market and economic trends in a manner that directly connects to their portfolio and the impact on their long-term goals. In-depth discussions, such as dissecting the intricacies of the "Fed dot plot," are not necessary. They appreciate a focused approach that provides them with the essential insights on how these trends influence their investments and progress towards their desired objectives.

Emerging trends: Balanced believers typically seek a balance between adhering to traditional portfolio strategy wisdom and exploring emerging investing trends and themes. For example, a balanced believer may have high-level interest in hot trends like ChatGPT, but won’t be looking to make any drastic portfolio changes to “chase” such interest. Focus the discussion on the investor's already significant level of exposure to artificial intelligence (AI) through specific companies.

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Though investment performance is woven into these discussions, the advice experience goes far beyond that when advisors are equipped to dig in and better understand each client’s persona as an investor and as a human being. In my next article, I will explore the "private investigator" mindset and provide valuable tools and insights on how to effectively engage with individuals who fall into this category. Get ready for a transformative journey into the heart of personalized financial guidance. It's time we as an industry rethink the way we connect with, understand, and serve our clients.

Zach Conway is cofounder and CEO at Seeds Investor, a wealthtech platform on a mission to help independent advisors win the hearts and minds of the new generation of investors.