How Understanding Client Behavior Helps Financial Advisors

Behavioral research studies indicate a relationship with money and the amount of assets individual investors choose to allocate to a financial advisor may be more strongly influenced by emotions and beliefs than advisors realize. 

Investopedia explored this topic during an online summit for financial advisors on July 26, 2022. Investopedia’s Editor-in-Chief Caleb Silver was joined by Lazetta Braxton and Peter Lazaroff, two of this year’s top 100 financial advisors, and Laura Gregg, senior vice president and director of practice management and advisor research at FlexShares ETFs.



Industry leaders joined Investopedia for a virtual summit on July 26, 2022, exploring how studies about investor behavior can help financial advisors build client trust and wallet share.

A recent study by FlexShares in partnership with researchers at the University of Chicago suggested participating clients with between $250,000 to $30 million in investable assets could be segmented into five types of profiles based on how their emotions and beliefs drove behaviors interacting with advisors and allocation decisions. 

Identifying and understanding client emotions can be key to identifying and responding to them in ways that support further development of client relationships and wallet share—especially during periods of economic uncertainty. 

2022 hasn’t been an easy year for U.S. markets, with the S&P 500 Index down nearly 18% so far. Amid the recent market volatility many financial advisors and their clients are choosing to wait it out. 

“We try to set expectations that losses are normal,” said Lazaroff, chief investment officer of Plancorp. Effective client communication helps them understand that staying the course doesn’t mean ignoring or failing to acknowledge market events. “It’s about building trust with clients so they know there is a process and that you are thinking through things,” he added. “They want to know that I have been paying attention, that I’m not pulling something out of thin air.” 

Nearly half or 57% of respondents in Investopedia’s latest survey of reader sentiment said they are “worried” about recent market events, with 25% of them saying they are “very worried.” Both of those figures are several percentage points higher than an earlier sentiment survey released in April.

How Studying Client Behaviors Can Help Advisors Grow Trust and Wallet Share

The FlexShares study found that understanding client profiles—and how they are likely to respond—may help advisors to identify and tailor responses to clients’ behavioral tendencies, building deeper relationships and supporting them to win more assets. Those profiles were the protector, the competitor, the collector, the verifier, and the simplifier, in order of the share of assets invested with an advisor.

Simplifiers were those clients who preferred to have a single advisor they could largely delegate oversight of their investments to, with over four-fifths of their assets invested with a primary advisor. By contrast, verifiers would leave just over three-quarters of their assets with their advisor and ask many questions, expecting advisors to gain their trust over time. Collectors and competitors would typically have multiple advisors with a smaller share of their assets allocated to any given advisor, fostering competition for wallet share. Protectors were the most risk averse and highly skeptical, with less than half of their assets entrusted to their primary advisor. 


Braxton and Lazaroff said that while a majority of their clients would be considered simplifiers under this framework, that hasn’t always been the case. Braxton, co-CEO and co-founder of 2050 Wealth Partners, noted that many of her clients had never worked with a financial advisor before coming to her firm. 

“Our model is partnership. Do we have to help investors move along the spectrum? Absolutely. It’s a journey, and that allows different personas to come out and play. The journey helps us get them where they want to be,” she said. That journey requires developing deeper rapport and trust, and demonstrating the added value of holistic planning that makes sense for them. 

Knowing these client profiles, and how they are likely to respond, can help advisors to identify and tailor responses to clients’ behavioral tendencies, building deeper relationships and supporting them to win more assets. 

Gregg told Investopedia that in FlexShares’ study, many advisors didn’t recognize which persona their clients would fit into. “That was a bit concerning,” she said. “If you don’t truly understand your clients’ money story, their expectations, and their emotions driving behavior, then you are not in a place where you can give them the service and client experience they need.”

“Each one of these personas you can definitely build trust with, and as you build trust, you will get more market or wallet share,” she added. “Clients need to know that you’re in it for them.”

Braxton echoed this sentiment. “I have a motto—T.R.U.S.T.—Trading Resources Using Sustainable Truths. That’s anchored in the idea that clients are giving us money and time so they can count on us,” she said. “We need to give them value, and emphasize time and time again that they can count on us. We would like to be forthcoming and vulnerable so we can serve their best interests.”

The type of client Lazaroff targets has changed over time while growing his practice. Earlier in his career, he would more frequently target collectors, or clients with multiple advisors, and gain more assets with greater experience. That also meant offering some advice free of charge, particularly early on in the relationship to help build trust—another important factor in acquiring and retaining clients. 

“I think people underestimate playing the long game,” said Lazaroff. “In general, good financial advisors really play the long game. It will help you build trust and pay off in the long run.”

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