Date: November 11, 2015

Financial Advisors – What Can You Do to Attract These 5 Types of Investors?

Paladin Research has identified five types of investors who are most likely to use the services of a Robo Advisor or Virtual Advisor (VA).  Financial advisors, it’s important to recognize what drives an investor to make their decision between using you, a Personal Financial Advisor, or a Robo Advisor.

  1. They Had A Bad Experience

The first type of investor had a bad experience with a personal ‘live’ financial advisor. There is a good chance they selected the wrong advisor, and now no longer trust advisors to help them achieve their financial goals. They have two choices: They can “DIY” or they can use the services of a Robo or Virtual Advisor.

  1. They Think They Can “Beat the Market”

Some investors do not believe financial advisors, who provide active management services, produce superior investment returns compared to returns that are produced by the market (index funds). One alternative is passive investment services that are provided by Robos that invest in index funds and ETFs.

  1. They Don’t Like High Investment Expenses

Investors have become very sensitive to the total amount of layered fees that are deducted from their investment accounts. They do not believe they have received adequate value in relation to the fees that they are paying. They measure adequate value based on performance, risk management, and personal services (meetings, reports).

  1. They Have Small Asset Accounts

The best financial advisors, who work for fees, do not want to work with investors who have smaller asset amounts. You cannot cover their costs.

Investors with smaller asset amounts end-up with salesmen who sell investment products for commission. Over 92% of investors have told Paladin they do not want salesmen investing their assets. A Robo Advisor may be their best alternative.

  1. They Are Typically Generation X and Y

Gen X & Y have grown up with technology and services that are delivered over the Internet. They are more comfortable letting algorithms manage their assets. Younger investors with smaller asset amounts may be the Robo’s biggest potential market.

How do you find and secure these investors?

Robo’s are attracting these investors due to their digital marketing expertise. However, where they are failing is their inability to provide a live advisor, like yourself.   You need to compete with the Robo’s in the areas of digital marketing by growing your online presence.  Where you have the edge over the Robo’s is that you are a live body willing to speak with an investor.  Robo’s are starting to recognize this need which signifies the recent merger between Mutual Fund Store and Financial Engine.

As an advisor seeking to grow your book of business, the investors with the above attributes will eventually have larger asset accounts, so adding a Virtual Advisor service to your platform will allow your firm to bring these clients in and keep them for the long haul.

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Jack Waymire

Jack spent 20 years in the financial services industry before joining Paladin as its Chief Marketing Officer in 2004. Jack is the author of two best selling books including Who’s Watching Your Money? and 5 Steps for Selecting the Best Financial Advisor. He provides consulting services and writes website content, blog articles, pillar pages, and eBooks for Paladin and a select clientele.