The Nedgroup Investments behavioural study revealed six personality archetypes that people tend to cluster around. These personality types can be categorised into two broad groups that are easy to identify, namely high composure and low composure clients.
Identifying which group a particular client falls into can be as simple as asking your client how they feel about a portfolio dropping from R 1 million to R 600k in less than 3 months during the 2020 covid-19 crisis. A low composure client will show (extreme) discomfort, while a high-composure client will appear relatively unaffected and may simply respond with a “that’s markets for you!”.
Although there is a high overlap in communication needs and preferences within these two broad groups, as discussed in the previous article, there is more value to be unlocked by understanding the three types of low composure and the three types of high composure clients.
To do this, you need to know where your clients rank on the following key differentiating characteristics:
Getting to know the LOW composure group
Let’s first get to know three low composure clients namely Sam, Mari and Kgomotso.
Sam is 38, married, has two dogs and a cat and works at a well-established practice as a general practitioner (GP). He has recently bought his family their dream home and was conservative in terms of affordability to ensure their loan repayments don’t impact their lifestyle. They enjoy traveling. Sam is financially comfortable. His bank balance stays in the green, he has a healthy ‘in case of emergency’ fund - invested in a money market - and has the benefit of a dual-income home with his wife working as a high school teacher. Sam’s long-term financial plan, however, is not as healthy as his day-to-day living. He enjoys reading the Financial Mail and comes to you with lots of ideas about the market and investing, but he is also quick to get nervous when one or two headlines are bad. He has certainly built up a strong bias towards the safe and predictable money market fund he uses for saving.
Mari is a 45-year-old mother of three. Her husband is an entrepreneur that goes through the usual ups and downs of owning a business. All three of her kids are in private school, and she gave up her career as an oral hygienist when their third child was born to take care of the kids full time. Her days are full! She is constantly worried about their daily finances and doesn’t have the time – or the head space - between school lifts and helping with homework - to find and consult a financial advisor about setting up a solid long-term plan. She worries about the now and doesn’t feel “clever enough” to have a conversation about her financial situation with an advisor.
Kgmotso is 53 years old with two kids at university, both on bursaries that cover the bulk of their educational expenses. Her son is studying accounting and her daughter is following in her dad’s footsteps by studying law. Kgomotso and her husband recently downscaled their house, as the kids are only home every other weekend. They still have about 7 years of bond repayments left and will most likely need to help their kids furnish their first apartments over the next few years. Kgomotso – still working as a legal secretary - is confident they will manage, although she worries about external shocks to their financial planning. There is so much that could go wrong! She is, however, a very keen news watcher and reader and often calls you about investment performance she saw that is better than hers – even when her portfolio is on the up.
Can you tell who is who?
Within the low composure group, it can be as simple as recognizing only one or two differentiating characteristics that is exceptionally high or low to identify the sensitive, stressed or skittish archetype.
Using the chart below which illustrates where each archetype ranks from high to low on the differentiating characteristics, can you place Sam, Mari and Kgmotso?
How did you do?
Sam is a sensitive client. He is likely to struggle with investing as he is easily upset by short-term, negative news and tend to gravitate to familiar options.
A few things you can do to help Sam is to:
Kgmotso is a skittish client. She will raise many “what if” scenarios and questions both with regards to her personal situation and the markets. She will be prone to knee-jerk reactions in market downturns and switching funds if she underperforms.
A few things you can do to help her is to:
Mari is a stressed client. She is extremely short-term focused, on top of lacking financial comfort, making it hard for her to get started.
Things you can do to help Mari is to:
In the next article in this series we will explore practical ways to understand the high composure group of clients.
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