Analytics for wealth management: The new way to listen to your clients

Social Business Manager, IBM

The Greek philosopher Epictetus said, “We have two ears and one mouth so that we can listen twice as much as we speak.” Can financial advisors learn from this bit of wisdom? As a financial advisor, the key to success is getting to know your client. Clients' needs vary based on:

  • Financial goals
  • Life goals
  • Spending habits
  • Levels of comfort with financial advisors
  • Levels of risk tolerance

What can you do as a financial advisor to ensure you have the information you need to provide tailored financial planning?

Ask. Listen. Repeat.

Here are some helpful suggestions from a Financial Planning article by John J. Bowen Jr. Spend less time upfront rattling off your qualifications and superior investing skills, and instead take the time to ask your client questions that will help you ascertain key pieces of information that will become invaluable as you build a plan for your client. Moreover, this practice should not be a one-time occurrence. Bowen also recommends checking in with your clients during every regular progress meeting to find out if there have been any major life changes you should factor into your investment and financial plans. Financial planners who not only show interest in their clients’ needs and goals, but also use that information to formulate strategically sound and relevant financial plans, are likely to increase client satisfaction and retention. It’s a win-win for both parties. is one of the best gifts you can give your clients. It will help you build the type of relationship and portfolio that other financial planners will envy. However, if you really want to make your fellow financial planners jealous, be the first to sign up for a live demo of Behavior Based Client Insight for Wealth Management, a solution that generates advanced customer segmentation based on behavioral data and predicts life events. With this solution, financial advisors can uncover deep customer insights and provide personalized advice and tailored portfolio recommendations to their clients. You can then share this with other financial advisors and send them the link to register for the live demonstration.

Before the live demo, let’s look more closely at some of the invaluable information financial advisors should glean during a client meeting.

Financial goals

Your clients have different goals for different stages of their lives. Can you spell out their short, medium and long-term financial goals? Can your clients even define those goals? Work with your clients to determine what they want and need to achieve financially. As a result, you will be able to provide more targeted advice and develop a strategy that will keep them with you for the long haul.

Life goals

Life happens. When you can, start planning for major life events early. Is your client preparing to get married, start a family or buy a house? Keep your ears open to find out what your client’s life goals are, and be cognizant of the need to check in during client meetings to see if there have been any major changes.

Spending habits

Don’t forget your clients’ day-to-day spending. Over the course of a year, expenses can add up, and according to Tim McGrath, founding partner of Riverpoint Wealth Management in Chicago, “spending is the biggest secret that clients keep.” It turns out that clients may keep spending information from both their financial advisors and their spouses. McGrath recalls a startling example: “One spouse was very aware that they had been building up credit card debt. The other had no clue at all.” The result was quite unpleasant. McGrath had to liquidate assets to pay off the bill since his clients had “no means to have any credit card debt.” He further recounts, “It was a big surprise to everyone except for the person who was spending. It led to a conversation where there was blood in the water."

Comfort with financial advisors

There are two dynamics at play in terms of comfort with a financial advisor, so pay close attention to pick up on both of them when meeting with your clients. Drew Horter outlines 5 questions to ask prospective clients in Financial Planning, but in his prelude he makes a great point:

“Some [clients] have worked with advisors in the past, only to be put in portfolios that were unsuitably risky. Too many of these individuals suffered dramatic losses during the financial downturn in 2008; as a result, financial advisors still have a long way to go to rebuild relationships and regain public trust.”

Previous experiences can color a client’s perspective toward financial planning and you specifically as a financial advisor. So make sure to keep your ears open to pick up on any hints that your clients may be uncomfortable or keeping something from you. For example, your clients could have assets hidden away that keep you from developing a comprehensive financial plan.

The other dynamic to keep in mind is personality. Clients have different types of investment personalities that should help you determine the best way to interact with them. Some of these personalities (outlined by psychologist Ned Hallowell) include “the Dodger (who feels anxious about anything money related and avoids the topic as much as possible), the Gambler (who gets immense pleasure from taking significant risk with his assets) and the Jock (who sees his level of wealth as a scorecard to be compared with everyone else’s).” So while the Dodger may need to be reassured that you have everything under control, the Gambler may need to be steered toward more sensible (and diversified) investment decisions.

Risk tolerance

Risk tolerance will undoubtedly always be on the list of topics to discuss with your client. Is your client comfortable only with safer, low risk investments, or is your client open to a more moderate level of risk? Your client’s risk tolerance is an important factor to consider when putting together the ideal investment portfolio. But there is one more piece of the puzzle that financial planning expert Michael Kitces describes in a thoughtful post: goal risk. Kitces takes the traditional risk tolerance view one step further:

“[T]he real key is that risk tolerance should first be applied to the goal itself, and determine whether the goal—and the portfolio necessary to achieve it—is consistent with the client’s risk tolerance. If the ‘goal risk’ is too high, the real solution is not finding a portfolio to achieve the goal, but finding a new goal that isn’t too risky for the client to tolerate in the first place!”

As a financial planner, it will serve you well to evaluate your client’s risk capacity as well. Risk capacity essentially measures if your client can achieve his or her financial goals if faced with a risky (aka bad) outcome. Risk may be scary for some clients to talk about, but it is essential to make sure everyone is on the same page.

How nice would it be to have a centralized dashboard that provides advanced client segmentation based on behavioral profiles? What if you could sense changes in your clients’ life goals? The IBM Behavior Based Client Insight for Wealth Management solution predicts life events using historical data, so this dream can become your reality. IBM Behavior Based Client Insight for Wealth Management is truly the analytics-based answer you have been searching for. Sign up for a live demonstration and see for yourself how analytics is the new way to listen to your clients.